NWA profitable at $100 a barrel oil, Delta doing well on INTL flights--articles

General Lee

Well-known member
Aug 24, 2002
Total Time
A lot
Northwest profitable with oil at $100: CEO
Wednesday October 1, 7:45 am ET
TOKYO (Reuters) - Northwest Airlines Corp (NYSE:NWA - News), which is set to be acquired by Delta Airlines (NYSE:DAL - News), can be profitable with oil at $100 per barrel, Doug Steenland, the company's chief executive, said on Wednesday.

Despite the turmoil in credit markets, Steenland said he was confident the merged airline would have sufficient liquidity to manage its operations well into the future, noting that the airline would have $6 billion in cash on closing.

"Our bookings have been keeping pace with our anticipation," Steenland said at a news conference in Tokyo.
"But obviously we are concerned and mindful of whether we will see impacts coming from challenges in financial markets and contractions of credit over months ahead."

Crude oil was trading at about $101 on Wednesday, well off the record high above $147 reached in July.
Northwest is in the process of being acquired by Delta to form the world's largest carrier. Regulatory approval for the deal, which has been approved by shareholders, is expected by the end of the year.
The new airline -- the world's largest by traffic -- is to be called Delta and have its headquarters in Atlanta.
(Reporting by Kaori Kaneko; editing by Elaine Hardcastle

U.S., International Airlines See Paths Diverge
Wednesday October 1, 9:13 am ET
ByTed Reed, TheStreet.com Staff Reporter

CHARLOTTE, N.C. -- A gap has emerged between international airlines, which are generally forecasting a bleak year in 2009, and their more optimistic U.S. counterparts.
For the U.S., analysts and some industry leaders are expecting profits next year. According to Scott Kirby, president of US Airways, 2009 revenue per available seat mile will likely increase at a double-digit rate.

Helping the situation is an unprecedented 10% capacity reduction across the industry and new fees that are adding hundreds of millions of dollars in revenue, Kirby said at a recent investor conference.
"You would certainly expect double-digit RASM growth at an industry level, and even that might seem conservative," he said. "I don't think it's fully appreciated yet, the structural changes the industry has made in our business model, designed to deal with $145 oil."

Meanwhile, the International Air Transport Association projects the worldwide airline industry will lose about $4 billion next year. The group said Tuesday that international passenger demand growth slowed to 1.3% in August, after expanding by 5.4% in the first half of the year and by 1.9% in July.
"The slowdown has been so sudden that airlines can't adjust capacity quickly enough," said IATA CEO Giovanni Bisignani, in a prepared statement.
While U.S. domestic capacity is shrinking, international capacity has been heading in the other direction, particularly in the trans-Atlantic market. Meanwhile, world economies are slowing, especially in Asia (Asia-Pacific traffic shrank by 3.1% in August, IATA said.) And the oil-price shock, long apparent to U.S. airlines, is belatedly catching up with international carriers.

"If you look at Asia, they clearly have hit a soft patch, while in Europe, you're starting to see a lot of softness," says Dan Kasper, managing director of Cambridge, Mass.-based consulting firm LECG. "On the North Atlantic, there has been a lot of capacity added, and that has brought down business fares, particularly into Heathrow."

"Most airlines are much more dependent on international markets than U.S. carriers are," Kasper says. "Our portfolio has more domestic in it, which hurt for a while, but the carriers have finally gotten things under control."

Among U.S. airlines, international capacity makes up the largest percentage of flying for Continental , this year reaching 50% of its total. By contrast, Lufthansa doesn't even break out its home country of Germany in its reporting. Instead, it includes Europe and Germany as a single category, accounting for 68% of 2007 passenger revenue.
Industry consultant Robert Mann says rising fuel costs and reduced business travel are humbling European carriers.

"In the last six to eight weeks, some ominous noises have been coming out of Europe," because, until recently, the dollar's decline against the euro was making higher energy costs more evident, Mann says. Additionally, an increase in premium capacity across the North Atlantic -- including new Paris to New York flights by British Airways subsidiary OpenSkies -- seems to have coincided with a decline in travelers paying high ticket prices for the best seats.
"Every time you get to the end of a business cycle, the amount of premium fare travel goes down, because deals aren't being done and consultants, lawyers and investment bankers aren't traveling in first class any more," Mann says.

The falloff in China travel hasn't helped UAL, the largest carrier between the U.S. and China. "While the Olympics were a terrific event, it wasn't actually a terrific even in terms of business traffic this past quarter," said UAL Chief Financial Officer Kathryn Mikells. IATA said "economic distortions surrounding the Beijing Olympics "contributed to the sharp decline in Asia-Pacific traffic in August.

Surprisingly, the drop in international travel is not hurting Delta, the U.S. carrier with the most rapid international expansion.

"We are not seeing a tremendous amount of softening or weakness with respect to international," Delta president Ed Bastian told an investor conference. "We are looking at solid double-digit RASM growth."

The reason, Bastian said, is that Delta's recent expansion has focused on unique destinations in Africa and the Middle East. Also, in November, the carrier plans to move its Mumbai flight from New York to Atlanta, where it can take advantage of the world's biggest hub.

As for Heathrow, Bastian conceded, "It's a bloodbath if you're an incumbent," but the yields still look good to a carrier that until recently was not permitted to serve the airport.

Bye Bye--General Lee
Last edited: