Oil and airlines

[crxpilot]

What Happens to Airline Profits As Oil Prices Continue to Rise?

Last week, Merrill Lynch analyst Mike Linenberg plotted the demise of airline profits for 2008, based upon existing hedges and a number of projected potential crude oil prices. Some might argue that Mike didn't take out the exercise far enough, as he stopped at $110 a barrel. But hey, we can still be optimists, can't we?

The airlines compared in the chart are Alaska, American, Continental, Delta, Northwest, United, AirTran, Allegiant, Frontier, JetBlue, Southwest, and US Airways.

With oil at $70 a barrel on average, for the year, all the airlines will post a profit for the year.

With oil at $80 a barrel, on average, Frontier is projected to post a $5 million loss.

With oil at $85 a barrel, on average, Frontier now sports a $20 million loss.

With oil at $90 a barrel on average, Frontier posts a $34 million loss, JetBlue posts a $17 million loss, and American Airlines would post a $204 million loss.

With oil at $95 a barrel, on average, Mike projects that American Airlines will post a $538 million loss, Delta will post a $100 million loss, Continental will post a $12 million loss, United will post a $116 million loss, AirTran will post a $27 million loss, Frontier will post a $48 million loss, and JetBlue will post a $45 million loss.

At an average cost of $95 a barrel, only Alaska, Northwest, Allegiant, US Airways, and Southwest will post a profit.

Now, here's the kicker.

If we were, heaven forbid, to see an average price of $110 for oil this year, only two airlines would still post a profit, according to Mike's calculations. One? Southwest Airlines. The airline would still post a $445 million profit for the year.

That's startling enough.

But so is the other airline that would still be profitable.

That airline? The one that flies all MD-80s. Allegiant. According to Mike's projections, the airline would still manage to post a profit of $3 million for the year. With oil at $110 a barrel.

And yes, as someone pointed out this week, Mike obviously is not factoring in any defensive "moves" any of the airlines might make to mitigate rising fuel prices.

http://i12.ebayimg.com/03/i/000/df/dd/4d1f_1_sbl.JPG

 

[viper548]

Have you seen allegiant's payscale, I'd believe it

 

[blzr]

All airlines will have to pass the cost of fuel along to the consumer. Every other industry is. Been to the grocerystore lately?

We paid $7.02/gal last week in New Jersey. That was for just 600 gal. I can not imagine what it costs to fill a 73 or 75.

Even if the price is passed on th the consumer, I don't believe too many will stop flying. Just those cheepo's that want the $70 round trip in first class.

Who knows, this might make airline travel fun again. no more sitting next to the greaser in a wifebeater and flipl-flops. ( and that is in January).

 

[brainhurts]

Hey General Lee,
How come NWA is going to make a profit??? How much is Delta going to lose? Hmmmmmm

 

[Superpilot92]

Hey General Lee,
How come NWA is going to make a profit??? How much is Delta going to lose? Hmmmmmm

Please dont egg him on:bomb:

 

[Falcon Jet 1]

Look at NWA payscale thats how!:uzi:

 

[YourPilotFriend]

This years projected fuel price will be $111.0 a bl. Draining an additional $42 billion from the airlines.

 

[Tomct]

Time to start drilling in Alaska and tell those EPA Pukes to SHOVE IT!! Need to get out of the Middle Eastern Oil. This is a very bad situation for our country too be in....US OIL BABY!!!

 

[Bruno82]

Well, it seems to me the biggest driver in oil prices is the speculators and the drop in our currency. Both, in my opinion, increase oil prices due to the interest rate cuts by the Fed.

 

[D-Bo]

Time to start drilling in Alaska and tell those EPA Pukes to SHOVE IT!! Need to get out of the Middle Eastern Oil. This is a very bad situation for our country too be in....US OIL BABY!!!

There isn't enough oil in Alaska to be drilled for that could bring the price per barrel down. Also, I hope you realize that although we may need to get out of Middle East oil, the price per barrel isn't determined in the Middle East. It isn't even determined by OPEC. It's not even determined by the oil companies. It's determined on the floor of the Merck Exchange in New York and a couple other exchanges around the world.

Want to see a worse situation? Burn through our reserves. It would make the current situation highly desirable.

As much as many want to drill in Alaska, what we would get out of the ground up there is really a very small drop in the bucket compared to the other supplies around the world. It would have a very minimal impact on total supplies and thus have a very minimal impact on price.

 

[vixin]

There isn't enough oil in Alaska to be drilled for that could bring the price per barrel down.
As much as many want to drill in Alaska, what we would get out of the ground up there is really a very small drop in the bucket compared to the other supplies around the world. It would have a very minimal impact on total supplies and thus have a very minimal impact on price.

Not what the pres of Shall oil said last week. He stated their is 3 times more up their under the ice shelf then in Suadi. Plus we could deep drill in the Gulf. He stated this would all but make us independent of foreign oil for at least 100 years. Something else the do gooders dont want us to do.

 

[chperplt]

Have you seen allegiant's payscale, I'd believe it

You can reapply in 12 months, but with that attitude, I don't think you have much of a chance this time around either.

 

[PCL_128]

Drilling in Alaska won't help. If we started right now, it would be 10 years until the first barrel made it on the market.

 

[arthompson]

PCL: Your sentiment is right but your numbers are off. Either way it's not an immediate fix, but it is a viable down line mitigation.

 

[CatfishVT9]

Not what the pres of Shall oil said last week. He stated their is 3 times more up their under the ice shelf then in Suadi.

People on 'ludes should not post.