The Perfect STORM: Oil Gets Above $49 - Not Good....

[On Your Six]

This can't be good news for USAirways, UAL, AMR, Delta, ATA, etc... Just puts more pressure on getting pilot concessions - continues to lower the bar more and more.

Who did we liberate in the Middle East? Thanks for your help... Time to drill Anwar in Alaska (although that still wouldn't help).


Oil gets above $49

Intense fighting in Iraq, an oil pipeline attack and rising imports drive runup.
August 20, 2004: 8:08 AM EDT

NEW YORK (CNN/Money) - A slowdown in oil's rapid rise is nowhere in sight as escalating violence in Iraq and continued high demand pushed record prices closer to the $50 a barrel mark Friday.

The contract price for U.S. light crude for September delivery jumped to an intraday record $49.27 in electronic trading Friday, up 57 cents from Thursday's record settlement.

In London, Brent crude for October delivery was trading at $45.06, just shy of its record of $45.14 reached earlier Friday and 73 cents more than Thursday.

The push to new peaks came as U.S. warplanes pounded areas near a shrine in Najaf where Shi'ite militiamen remained holed up after their leader, rebel cleric Moqtada al-Sadr, defied an ultimatum from Iraq's interim government to disarm.

The fighting compounded fears of further attacks on Iraqi oil infrastructure by insurgents who set fire Thursday to the headquarters of the state company that operates Iraq's southern oil fields, the South Oil Co. in Iraq's port city of Basra.

Although the South Oil Co. incident did not appear to disrupt supplies, Iraq's southern pipeline has been shut since a sabotage attack on Aug. 9, curbing export flows to about a million barrels daily, half normal rates.

Rising world oil demand has left little slack in the system to cope with outages in Iraq where Shiite militia have lived up to threats they will target oil infrastructure if U.S. forces do not leave the holy city of Najaf.

Demand also showed no signs of slowing as imports rose in both India and China.

Despite government efforts to slow an economic boom, Chinese crude imports for July jumped 41 percent with imports for the year to end-July up 40 percent year-on-year, according to customs data.

India's top refiner, state-run Indian Oil Corp. Ltd., said it expected the country's crude oil imports to rise 11 percent in 2004/05 as demand rises nearly four percent. [url="http://i.cnn.net/money/images/bug.gif"]http://i.cnn.net/money/images/bug.gif[/url]

 

[drag]

"This can't be good news for USAirways, UAL, AMR, Delta, ATA, etc... Just puts more pressure on getting pilot concessions - continues to lower the bar more and more."

Funny, most industries pass the overhead to the consumer. Oil prices up and fares come down. Why? Because pilots are overpaid and thus should cover gas prices. This way the consumer can still have cheap tickets. The real problem is that there are too many airlines. Lets hope we see $60 a barrel throughout the winter. Let the weed-out begin. Hopefully, the gov't will stay out. In particular, w/ the way they pander LCC's. This way, a true market can exist and enable the industry to stabilize.

 

[Mugs]

That is a nice short term solution. However, are there aluminum / composite materials eating termites in the desert where all those airplanes will get parked? If not, they will be back in the game before long to be operated cheaper than ever to put downward pressure back on ticket prices.

 

[jetblue320]

"This can't be good news for USAirways, UAL, AMR, Delta, ATA, etc... Just puts more pressure on getting pilot concessions - continues to lower the bar more and more."

Hopefully, the gov't will stay out. In particular, w/ the way they pander LCC's. This way, a true market can exist and enable the industry to stabilize.

Care to expand on the "pandering" part? Your statement partially contradicts itself. Think about it for a second. I would think that oil being $60 would hurt the airlines you mentioned more than LCC's. As far as I can tell, two LCC's (SWA and JB) are pretty comfy with fuel hedges that THEY made, not the government. Help me out with your statement if you would, seriously.

C yaaa

 

[Daddy]

While I can't speak for him, I think what he meant by "pandering" was the government intervening in not allowing consolidation to take place at the majors, vis a vis UAL and UAIR, NWA and CAL, and myriad of other mergers that could have occurred without the government's intervention due to antitrust concerns...thus preventing the majors from gaining better economies of scale, limiting competition, and controlling pricing. Another intervention problem is that they have also given aid to dying airlines and prolonging the inevitable vice letting the weak players die out allowing the survivors to thrive (or at least squeak by). While the government aid has gone to everyone, the LCC's have benefitted the most from the intervention policies as a whole as few majors have been able to monopolize a market and control prices as they have in the past.
UAIR used to run well over 90% of the flights out of Charlotte & Pittsburgh, DAL "owned" Atlanta, NWA "owned" MEM, MSP, DET...those days are gone mostly because LCC's have moved in and now control the pricing. The government didn't do this to be mean, they just wanted to do what was best for the consumer. Arguably they have done that as prices have come way down and no airline can afford to lose the revenue that they lose when they raise prices in these highly price sensitive markets now. I think most experts will agree that this is best for the long run for prices, but will ultimately hurt the small towns currently serviced by the feeders for the majors that the LCC's won't touch. Perhaps eventually it will be worth it for LCC's to pick up that business, but not for awhile I think.
Anyway, I don't think he meant "pandering" in a mean way...just that the current policies have benefitted the LCC's the most which is true as they are doing much better in the current environment. Then again...I can't really speak for him, so maybe I am wrong...

 

[canyonblue]

Main Entry: 1pan·der javascript:popWin('/cgi-bin/audio.pl?pander01.wav=pander')
Pronunciation: 'pan-d&r
Function: noun
Etymology: Middle English Pandare Pandarus, from Latin Pandarus
1 a : a go-between in love intrigues b : [size=-1]PIMP[/size]
2 : someone who caters to or exploits the weaknesses of others


I'd sure go with the PIMP version. I sick of the Government Pimp taking my airline's money to fund his habit, spending that is. Tax my A$$.

 

[SWA/FO]

Canyon Blue...I was looking for a picture of a pimp? Whats up with that, no picture?

 

[HA25]

"This can't be good news for USAirways, UAL, AMR, Delta, ATA, etc... Just puts more pressure on getting pilot concessions - continues to lower the bar more and more."

Funny, most industries pass the overhead to the consumer. Oil prices up and fares come down. Why? Because pilots are overpaid and thus should cover gas prices. This way the consumer can still have cheap tickets. The real problem is that there are too many airlines. Lets hope we see $60 a barrel throughout the winter. Let the weed-out begin. Hopefully, the gov't will stay out. In particular, w/ the way they pander LCC's. This way, a true market can exist and enable the industry to stabilize.

Well said, my friend!

 

[HA25]

Care to expand on the "pandering" part? Your statement partially contradicts itself. Think about it for a second. I would think that oil being $60 would hurt the airlines you mentioned more than LCC's. As far as I can tell, two LCC's (SWA and JB) are pretty comfy with fuel hedges that THEY made, not the government. Help me out with your statement if you would, seriously.

C yaaa

Dude, get off your LCC high horse! Half the **CENSORED****CENSORED****CENSORED****CENSORED**en reason this industry and namely our profession is suffering so bad is because assholes like you take jobs at carriers that pay 1/2 the wages of the so called "legacy" airlines.

Lets see how your fuel hedge does if JB were paying you pre-concession UAL rates on that Bus??

 

[Tony Montana]

It's funny how the airline industry works. It's a shame that us pilots are not paid as well as representatives at drug companies. That industry is flourishing right now and they are charging people an arm and a leg for their products. The drug industry and airline industry are two different things now, but are people who walk into doctor's offices and drop off samples really worth like 80,000 a year? We pilots have lots of responsibility and should be paid accordingly.

 

[miles otoole]

It's funny how the airline industry works. It's a shame that us pilots are not paid as well as representatives at drug companies. That industry is flourishing right now and they are charging people an arm and a leg for their products. The drug industry and airline industry are two different things now, but are people who walk into doctor's offices and drop off samples really worth like 80,000 a year? We pilots have lots of responsibility and should be paid accordingly.

I'd like to know where the 80,000 dollar a year drug rep jobs are. Much like all the airline pilots making 250,000 a year.

 

[jobear]

I'd like to know where the 80,000 dollar a year drug rep jobs are. .

Selling Viagra at Baptist Conventions, yup that's how I made my first million.

 

[canyonblue]

I'd like to know where the 80,000 dollar a year drug rep jobs are. Much like all the airline pilots making 250,000 a year.

I read about it in my latest copy of Drugs Inc.

Apparently there is an upcoming sales rep shortage and I am thinking of getting in to this so I can get rich. The brochure said to call:

Drug Inc.

Dr. Dit Karby

 

[drag]

The gov't envolvement consists of multiple factors. The major airline network needs to be consolidated just like the old steel and auto industry, current drug industry, media industry, telecom industry, banking industry, oil/gas industry, computer industry, and retail industry...just to name a few. Natural market forces.

However, the airlines seem to be excused from this natural progression. UAL/AWA, UAL/UAIR, AMR/UAIR, NWA/CAL, CAL/DAL are all examples of recent attempts. Gov't then FORCES UAL/AA to give up slots at ORD, only to then be filled in by FLYI......more RJ's to ORD. Non-perimeter slot giveaways at DCA to Frontier, AWA, and Alaska. Special gov't privledge at LGA to multiple LCC's. ATA, AWA, and F9 get gov't loans but not UAL. If not for these gov't loans, AWA and ATA would be gone. ATA still has one foot in the grave. AWA has junked transcon fairs out of LAX and SFO......thanks to gov't.

This "artificial" environment has now created an uncapitalistic and unamerican situation. This fake world has destroyed pricing control. It has also produced a fake haven for LCC's. Oil doubles and fares go down??? Let the markets dictate the industry or fully regulate it.

 

[Immelman]

About LCCs/hedges: Anyone know how LONG they (JB, SWA) are hedged for? A hedge, like a stock option, is only good for so long. Sure, you can buy multiple hedge contracts at expiration dates years in advance, but you can only do so for so long (and it only makes financial sense to hedge for so long - a longer term contract introduces higher volatility, and therefore a greater price to buy the contract).

The point of my question: if fuel stays high, it will catch up with LCCs. Does that mean SWA & JB start going for concessions? Does it mean they (and therefore the majors) finally raise fares? Even as a consumer (not an airline pilot) I would hope for the latter.