Thoughts regarding market's effects on airline travel?

[patrickdc9]

I'm not sure why I'm asking this question to this board because I'm sure the responses will all be negative and only fuel my fears, but I haven't seen anything written about the bottoming markets (both foreign and domestic) and the effect on airline travel. Specifically I'm concerned about the DAL/NWA merger because it is predicated on international growth and we've seen foreign currency quickly falling below the US $.

So if the DAL and NWA boys can stop bickering about the open statements from the arbitration, which we have no control over anyway, can we get some intelligent thoughts on this current "economic crisis" and the effect on the new airline?

 

[gutshotdraw]

The more immediate concern for all airlines will be the difficulty in obtaining credit at a reasonable price to weather this economic downturn. All businesses rely on short and long term credit to fund operations. The world credit markets have literally dried up and it will take time to create enough confidence in the market to get the pump flowing again. The next two-three years will be extremely difficult and some will fall by the wayside in every industry.

As to the "new Delta," I can't say what the outcome will be. My decidedly better half will hold a number somewhere on the combined list so I hope the airline can move forward. My guess is that with fuel prices softening, Delta will have enough cash reserves to come out the other side.

 

[blzr]

The problem for the airlines is that the credit freeze and the downturn are hurting the average passenger. They will, more than likely, cut WAY back on travel. All airlines will feel the pinch because of that. Also, those airlines with alot of cash will do ok, those that rely on creditors will probably......well

 

[lindsaya99]

I have also had the same concerns about the average airline passenger cutting back on traveling. I wonder if the business travelers who currently use corporate aviation will start returning to the airlines?

 

[jmreii]

The problem for the airlines is that the credit freeze and the downturn are hurting the average passenger. They will, more than likely, cut WAY back on travel. All airlines will feel the pinch because of that. Also, those airlines with alot of cash will do ok, those that rely on creditors will probably......well

With a condition of never having to stiff a creditor before. a willingness to use bankruptcy to eliminate one's debt would make you one of the last candidates I would consider for credit

 

[PuffDriver]

I'm not sure why I'm asking this question to this board because I'm sure the responses will all be negative and only fuel my fears, but I haven't seen anything written about the bottoming markets (both foreign and domestic) and the effect on airline travel. Specifically I'm concerned about the DAL/NWA merger because it is predicated on international growth and we've seen foreign currency quickly falling below the US $.

So if the DAL and NWA boys can stop bickering about the open statements from the arbitration, which we have no control over anyway, can we get some intelligent thoughts on this current "economic crisis" and the effect on the new airline?

Well, I would expect negative comments, because the news is pretty negative. As late as this week, I believe that Delta has stated that loads for fourth quarter are strong. It's kind of a delayed effect, I guess. Many of those tickets were probably purchased last month. I don't claim to be, nor am I, an expert regarding yield. With oil dropping as fast as the stock market, and the world economy tubing as well, I would expect hard times for all of the airlines, but especially airlines relying on the leisure traveler for their brea and butter. Disposable income will be the first to dry up.

It's hard to imagine, but I look for SWA to be hurting. Their hedges aren't as valuable, and they have great exposure to disposable income tickets. Air Tran is another. Of course, all airlines are probably going to take a bath, and some have gone as far as to say that there will be nationalization of the airlines in the US--that it will get that bad.

Staying power is indeed king--as in cash on hand. I would imagine that is why Delta tapped that last line of credit--before it went away. Anybody going into BK these days is in mega serious trouble--for there is no credit to get them out. In short, it looks pretty ugly, but America simply cannot let the transportation system go under.

I would imagine that you will get a lot of interesting replies.

 

[ACL65PILOT]

I agree that there is going to be a very interesting turn of events here in the next six months. It is part of the reason that DAL is trying to get the deal inked as soon as possible.
Heck they approved the Wells deal quickly, maybe ours will come sooner too.

Furthermore, Being the biggest one will be king.
Our loads are good, but we will be in the red big time for the year.
A major or two will go under if this is not fixed soon.
The silver lining to all of this is that all of those over night millionaires on wall st. are now not going to be able to afford NJ, or any private jet for that matter. That in turn will help the airlines a little...

 

[Truckdriver]

Delta just secured a $1 Billion line of credit about a month or so ago. One analyst said that the Delta team is either extremely lucky they got that line of credit when they did or they are geniuses. That along with cash on hand should give the combined carrier something like $6 Billion in cash to weather the storm. The credit lock up won't effect DAL/NWA as much as it will airlines that are going to need some cash. If we need money to finance airplanes, Boeing and Airbus have both said that they will expand their lending capacities to move airplanes. Oil is under $80bbl and probably trending down to around $60bbl. That is good news, but the savings there will be offset by a drop in demand for international passengers. I think the big thing to watch is how much international traffic drops. It doesn't always follow the forecasts and is typically less cylical than domestic traffic. It will drop, it's just a matter of how much. We'll just have to wait and see.

 

[fly4funcrj]

Most nj owners are not over night millionaires. Nj won't even consider an owner unless they have a net worth in the tens of millions (for the smallest plane nj has). Usually when the airlines cut back, nickel and dime their business class pax, that's when the private aviation world reaps the benefits.

Right now though, no one is safe.. Lets all hope for the best.

 

[ACL65PILOT]

Exactly, I know NJ is the cream of the crop. There are a lot of others out there that are not. They will feel it first.
We airlines are the modern day buses. Most people will not drive. They do not like their families that much.

 

[CapnVegetto]

What about oil guys? Oil has dropped a TON and is hovering around $80 bucks a barrel right now. Surely this is going to help the airlines some despite the market?

 

[Max Powers]

October 6, 2008, 4:43 pm
Airline Traffic Shrinks in September

Posted by Matt Phillips

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Large carriers saw slumping air traffic in September, as the impact of rising fares and economic turmoil took its toll.
Though the airlines have long indicated a desire to slim down in the face of historically high fuel costs, a few carriers — JetBlue, AirTran and Continental — had managed to eke out traffic gains in August.
Not so last month. Continental led the pack with a nearly 11% drop in passenger traffic, by revenue passenger miles, a closely watched metric equal to one paying passenger flown one mile. Other domestic legacy carriers also posted steep drops, including American (-9.1%) and United (-9.2%).
Discounters also saw traffic fall during September. Dallas-based Southwest’s traffic fell 5.9%. JetBlue fell 4.8%. Even, AirTran, whose large traffic increases in July and August bucked industrywide trends, finally fell in line with other carriers, dropping 2%.
So why is traffic on the decline? September saw the bulk of the planned capacity cuts that the airlines announced over the summer. And rising fares probably put leisure jaunts out of reach for a certain segment of the population. Of course, the fact that the financial system buckled at the end of the month didn’t help either.
In an e-mail, Darin Lee, an aviation economist with consultancy LECG in Boston, told us all of those elements probably played a role in the downturn in traffic, with “lower capacity being the most important of the three factors.” But going forward, the health of the economy will be important to watch.
“It’s pretty clear to me that economic turmoil is going to be a big theme the rest of 2008 and into 2009,” Lee wrote.
UPDATE: You guys are right. We should have mentioned Hurricane Ike’s impact on Continental’s traffic numbers. The carrier’s Houston hub — its largest — was closed for more than two days because of the September storm and Continental said Ike would cost it about $50 million.

 

[General Lee]

October 6, 2008, 4:43 pm
Airline Traffic Shrinks in September

Posted by Matt Phillips

Large carriers saw slumping air traffic in September, as the impact of rising fares and economic turmoil took its toll.
Though the airlines have long indicated a desire to slim down in the face of historically high fuel costs, a few carriers — JetBlue, AirTran and Continental — had managed to eke out traffic gains in August.
Not so last month. Continental led the pack with a nearly 11% drop in passenger traffic, by revenue passenger miles, a closely watched metric equal to one paying passenger flown one mile. Other domestic legacy carriers also posted steep drops, including American (-9.1%) and United (-9.2%).
Discounters also saw traffic fall during September. Dallas-based Southwest’s traffic fell 5.9%. JetBlue fell 4.8%. Even, AirTran, whose large traffic increases in July and August bucked industrywide trends, finally fell in line with other carriers, dropping 2%.
So why is traffic on the decline? September saw the bulk of the planned capacity cuts that the airlines announced over the summer. And rising fares probably put leisure jaunts out of reach for a certain segment of the population. Of course, the fact that the financial system buckled at the end of the month didn’t help either.
In an e-mail, Darin Lee, an aviation economist with consultancy LECG in Boston, told us all of those elements probably played a role in the downturn in traffic, with “lower capacity being the most important of the three factors.” But going forward, the health of the economy will be important to watch.
“It’s pretty clear to me that economic turmoil is going to be a big theme the rest of 2008 and into 2009,” Lee wrote.
UPDATE: You guys are right. We should have mentioned Hurricane Ike’s impact on Continental’s traffic numbers. The carrier’s Houston hub — its largest — was closed for more than two days because of the September storm and Continental said Ike would cost it about $50 million.

Airline capacity shrank because the airlines cut flights. As far as what people will do, some people say Netjets won't be affected because rich people who own their own G4s will sell them and then get fractional shares. The people that could afford fractional shares before, may be forced to go First Class on airlines, or atleast middle managers won't be able to use the corporate jet as much. People who could barely afford first class before, will go coach. And people who could go coach before, won't go or won't go as often.


Bye Bye--General Lee

 

[ACL65PILOT]

And if I am not mistaken, DAL's went up? I am to lazy to log on to Delta net to read the article again.

 

[Flopgut]

I chose to believe this will be good. We [airlines] have already been through this, got our bailout (which was almost nothing) and have found a way to cope. This is going to dry up growth for premium travel like NJA and those folks will be back on the airline (like P Diddy). Cheap gas and more customers back competing for fewer seats means we start jacking up fares. Gonna be good.