Intersting article...does not even address higher than $110 per barrel

[RedDogC130]

http://www.usatoday.com/money/industries/travel/2008-03-24-jet-fuel-costs_N.htm

can't get it to paste with charts here....does not even address loses with oil as high as it has been..scary

 

[FlyFastLiveSlow]

http://www.usatoday.com/money/industries/travel/2008-03-24-jet-fuel-costs_N.htm

can't get it to paste with charts here....does not even address loses with oil as high as it has been..scary

I've read that. The assumption of the writer that everything ELSE will remain status quo (ticket prices, etc.) makes the estimates worthless.

 

[The Prussian]

I've read that. The assumption of the writer that everything ELSE will remain status quo (ticket prices, etc.) makes the estimates worthless.

Plus, it's an old article...

 

[Tanker Clown]

Plus, Delta guys will take another pay cut. That'll help offset the fuel.

 

[Max Powers]

I've read that. The assumption of the writer that everything ELSE will remain status quo (ticket prices, etc.) makes the estimates worthless.

The losses are pretty spot on in the legacy area looking at the 110 dollar barrel. What I don't understand is AirTran's estimates...

Did he get two of them mixed up not meaning to put a negative on the numbers. I think at 110 per barrel our plan is to just break even.

 

[chucklhed]

So as fuel climbs to 110 a barrel, AirTran loses LESS money? Wish we had that problem.

 

[FlyFastLiveSlow]

Those are "looking forward" numbers, not first quarter estimates. They are for the entire yr08.

 

[rumrnr78]

Sorry to ask a stupid question, but how the European airlines been making it for so long? Are they all subsidized by their government or what?

Cheers- Rum

 

[flexpilot]

Here ya go!

High-priced fuel scares airlines
By Dan Reed, USA TODAY
Like poker players dealt a bad hand, they're trying to act calm, but $100-plus oil is starting to really scare the people who run the USA's airlines.
Record prices for both crude oil and refined jet fuel are threatening to send U.S. carriers spiraling toward deep losses, drastic service cutbacks, job cuts and, perhaps by year's end, an industrywide cash crunch.

CHART: How airlines' losses could mount with high fuel costs
A year ago, airline managers were talking about the return of a profits cycle in 2007 that would grow larger this year and extend into 2009 or even 2010. Now, they're grounding and selling planes, trimming service on marginal routes and eliminating it on others where there's no hope of making money. They are cutting jobs, rolling out more service charges and — to the consternation of travelers — raising fares almost weekly by amounts never seen before. They're also watching their cash balances closely and nervously.
Prolonged oil prices above $110 a barrel could do what all the airlines' long list of problems in the last seven years have not — drive one or more out of business. That's a worst-case scenario, however. The government's Energy Information Administration forecasts crude oil prices will average $94 a barrel this year. And airlines have a well-established record of surviving the most horrible business conditions.

But even if expectations of prolonged triple-digit oil prices prove wrong, no one expects them to fall back near last year's average of $72 a barrel, which was then perceived as painfully high. So U.S. carriers are certain to spend much more on fuel this year than they did last year — $2 billion more in Delta's (DAL) case at current oil prices, for example.
That means the USA's air carriers appear headed toward the kind of huge losses they rang up in the post-9/11 years before earning very modest profits in 2006 and 2007. In recent reports, several industry analysts have projected those losses could range from $1 billion to $9 billion.
"Something's gotta give somewhere," says Joe Hodas, a spokesman for Frontier Airlines (FRNT).
A small, Denver-based discounter, Frontier is squeezed not only by fuel prices but also by competition from United (UAUA) and Southwest (LUV) at its Denver hub.
Low-cost carriers such as Frontier are perhaps most threatened by high oil prices because fuel represents a bigger share of operating budgets, and because they have fewer assets they can turn into cash for survival. But Hodas says triple-digit oil prices are a threat to all carriers. "None of us can sustain $110-a-barrel oil long term; none of us, I don't think," he says. "Whether it's consolidation or the shrinking of capacity, you're going to see more of that (as airlines) deal with these fuel prices."
Analyst Michael Derchin at FTN Midwest Securities says airlines are entering "another Darwinian period of survival of the fittest." Not only must capacity be reduced, "Fares will have to be a lot higher," he says. And fuel surcharges like those now in place on most international tickets sold must be "adopted domestically as part of the pricing system."
That's already happening. There have been at least seven successful major fare increases this year involving the big network carriers. Eleven days ago, United led the industry in tacking up to $50 to the round-trip price of domestic tickets, a huge price increase by airline standards in any era. Five days later Delta followed with a $10 boost to domestic fares, and American (AMR) and Northwest (NWA) added $20 to most trans-Atlantic fares.
To reduce their exposure to high fuel prices, Frontier, JetBlue (JBLU) and AirTran (AAI) are selling some of their new planes. ATA Airlines, once the dominant discounter at Chicago's Midway Airport, is shutting down scheduled flying except for its West Coast-to-Hawaii flights. It will concentrate on charter service, where it's easier to pass higher oil prices on to the customer.
"The high cost of fuel and the fact that it stayed high were overbearing," says Steve Forsyth, spokesman for ATA's parent, Global Aero Logistics.
Even Skybus, the tiny year-old discounter that offers a few seats on all its flights for $10 one way, is reducing flights and scaling back its growth plans in the face of high oil prices.
Breaking the budget
Oil prices are affecting big carriers, too:
•Northwest Airlines. CEO Doug Steenland two weeks ago called oil prices, which were then at $105 a barrel, a "serious budget breaker," because an average annual price above $100 a barrel would add $1.7 billion to Northwest's fuel bill this year. That's more than double its 2007 pretax profit of $764 million.
•United Airlines. It currently spends about $173,000 to fuel a Boeing 747 for a flight from Chicago to Hong Kong, roughly double what it cost four years ago. United has to get nearly $500 in revenue out of each of the 347 seats on that plane just to pay for the fuel — and it still has to cover other expenses, including crew salaries, in-flight meals, the plane's upkeep, marketing and the cost of the jet itself.
•American Airlines. Its annual fuel bill rises $33 million for every penny increase in the average annual price of a gallon of jet fuel. Last year, it paid $2.12 a gallon after adjusting for its fuel hedges. As recently as January, it had been forecasting an increase of about $1.5 billion in its annual fuel bill this year, a daunting increase for a company that earned a profit of just $504 million last year. In a Monday filing with the Securities and Exchange Commission, American said it now expects to pay an average of $2.98 a gallon this year, and for its fuel bill to rise $2.6 million this year, to a total of $9.3 billion.
Top executives for most of the big airlines outlined their emergency course corrections last week at JPMorgan Chase's annual Transportation Conference in New York. Delta, United, JetBlue and US Airways said they're grounding about 70 planes in total. Continental (CAL) emphasized that it will use new fuel-efficient Boeing jets it has on order not for growth but to replace 63 old gas-guzzlers by the end of 2009. American, Northwest and Southwest strongly hinted that operational cutbacks are likely.
The fact that oil prices rose this year was no surprise. U.S. carriers paid an average $2.10 a gallon for jet fuel last year, according to their trade group, the Air Transport Association. That equates to about $72 a barrel for crude oil, and to $88.28 a barrel for refined jet fuel. Most carriers had budgeted for crude oil prices of $85 to $90 a barrel this year.
The shock has been just how much higher prices have gone and how fast they got there.
In mid-January, jet fuel on the spot market was selling for as low as $1.73 a gallon. This month, the spot market price, which last week briefly touched $3.40 a gallon, has been well above the $3.13-a-gallon price at which jet fuel peaked in the fall of 2005 after Hurricanes Katrina and Rita knocked critical Gulf Coast refining, storage and pipeline facilities offline, creating a temporary supply shortfall.
The big difference this time, says John Heimlich, the ATA's chief economist, "is that Katrina was a couple of days, while this is sustained." If the price of oil remains $100 or above, "There'll be fewer players," he warns.
In late February, Merrill Lynch airline analyst Michael Linenberg analyzed what would happen to publicly owned US carriers' net profits this year based on average oil prices ranging from $70 a barrel up to $110. At $75, all 12 airlines he examined would be nicely profitable this year.
At an average price of $95 a barrel, five airlines would scratch out some profits, and the industry would lose $322 million. At $110, only two airlines — Allegiant Air (ALGT) and Southwest — would make money, and the group would lose $3.3 billion.

 

[flexpilot]

Part 2

Cost cutting reaches its limits
To offset the effect of high oil prices, every carrier is looking for new ways to cut costs. But the reality is, many airlines have little left to cut.
In the years after the 9/11 attacks, airlines savagely cut costs, grounding many old, fuel-inefficient planes, dropping or cutting back service on weak routes and shifting service on marginal routes to their regional affiliates. Many increased their reliance on cheaper, contract maintenance providers. They sold ancillary assets and businesses, reduced or eliminated "frills" such as in-flight meals and pillows, and greatly increased their reliance on do-it-yourself technology that helped them cut tens of thousands of jobs. The big carriers used Chapter 11 bankruptcy reorganization — or the threat of it — to extract huge concessions from their vendors, aircraft lessors and labor unions.
There's not much more that U.S. airlines can achieve now via the bankruptcy process, say JPMorgan airline analysts Jamie Baker and Mark Streeter.
In fact, the only reason for any of the big U.S. carriers to enter bankruptcy protection this time around, they say, would be to keep from running out of cash. Even though airlines' balance sheets are almost certain to come under extreme pressure if oil prices remain above $100, the big carriers could sell assets and squeeze their vendors to stave off a cash crisis — at least until next year. But maintaining enough liquidity to stay out of technical default on loan covenants might be more difficult, they say.
In conversations with investors who are increasingly worried about a looming cash crunch, airline executives have begun emphasizing the strength of their balance sheets. Last week in presentations at the JPMorgan conference, senior Northwest, Continental, US Airways and Delta officials all emphasized what they believe to be their companies' more-than-adequate liquidity in light of triple-digit oil prices.
American Treasurer Beverly Goulet used a bit of humor to jab investors. Last summer and fall, she said, investors and analysts frequently questioned why her airline's parent, AMR, was building such a large cash balance and whether that was the best use of the company's money.
"The joke was that whenever people would look at the $5 billion-plus of cash on our balance sheet and ask (CEO) Gerard Arpey how much cash we really needed, his answer was always, 'More,' " she said. "Now, they're asking whether that's enough."
Contributing: Marilyn Adams

AIRLINE LOSSES GROW WITH RISING OIL PRICES | StoryAirlines' 2008 estimated net income or loss (

), in millions, if crude oil prices average these amounts per barrel for the year:

Airline$75$95$100$110

Alaska$104$14

$9

$54

American$797

$538

$872

$1,539

Continental$444

$12

$126

$354

Delta$538

$100

$260

$579

Northwest$488$43

$69

$291

United$540

$116

$280

$609

Total majors$2,913

$709

$1,615

$3,426

AirTran$87

$27

$56$0

Allegiant$47$22$15$3

Frontier$9

$48

$63

$91

JetBlue$66

$45

$72

$91

Southwest$495$467$460$445

US Airways$259$19

$41

$160

Total industry$3,877

$322

$1,371

$3,321

Source: Merrill Lynch Airline Research​