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.

 

[Max Powers]

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.

I hope your right...And with Obama pushing for the blue collar middle class folk at least they might be able to keep buying tickets even if on a smaller scale.

 

[~~~^~~~]

As Lehman learned, being small is not good.

As AIG learned, being big is very nice. Anyone else see the Senate hearing two nights ago on CSPAN? Holy crap!

Now the other shoe is beginning to drop in Europe. Turns out their suits are more screwed up than ours. Some are saying the Euro will not survive. At the same time those risking money and effort in the developing World are reaping the benefits of being a first mover.

Delta's global network positions it well. Letting Air France take over most of the Paris flying, while being a first mover into Africa is yet another indication that Delta's doing a good job right now.

Not that anything can be taken for granted. I don't know how profitable Delta is right now and all this nifty flying doesn't mean much unless the number on the bottom line is positive.

If crowds at the airport are any indication, demand remands OK. My immediate concern is that things might seize up to the point where Captains have to carry a form of monetary exchange to refuel the jet in some places.

Experts say that is starting to flow a little better now, but anyone who lets an airline purchase a few billion dollars worth of fuel on credit has to be aware of the exposure.

 

[Max Powers]

As Lehman learned, being small is not good.

As AIG learned, being big is very nice. Anyone else see the Senate hearing two nights ago on CSPAN? Holy crap!

Now the other shoe is beginning to drop in Europe. Turns out their suits are more screwed up than ours. Some are saying the Euro will not survive. At the same time those risking money and effort in the developing World are reaping the benefits of being a first mover.

Your the biggest tard ever. Europe is nowhere near as bad off as we are. The S and P has dropped over 40 percent from its highs in 2007!!!!! If memory serves it was at 1547 now it in the 900. Europe and Asia isn't anywhere close to this level of loss. They may drop some more but won't come close to our massive losses. They are using international accountanting laws, under Bush's deregulation WE DO NOT. Therefore we have much less transparency and it is much easier to skim money from here and there so you can get that big NJ sparkly jet.

 

[crj567]

I disagree: Airlines have NOT been through anything like this before. Airlines have already has their respective poopers worn completely out with high oil, now they are about to get slammed by frzen credit markets. Any airline that files BK will liquidate-and fast!

To be clear: The market has lost @50% of its value. This hurts everyone. I am not a big enough idiot to cash out. I am personally dumping just as much in to retirement as always. The point is: the rich are as affected as the poor if not more so.

Which leads me to the following conclusion: The fractionals are going to get completely hammered. Everyone has always assumed NJA is invincible-they are not. Many of the "rich" own small businesses-which are now unable to get short-term credit. Many of these business will fail, and many of their owners will not be "rich" long.

I believe NJA is stronger than the others, but I think fractionals are going to have a very hard time, very soon. The markets get smacked down, and your 10 mil has suddenly turned to 2 mil-you ain't thinking about going to Acapulco for a couple of days-you are thinking about cashing the hell out of NJA.

I do agree that others are in weaker positions, but I would not want to be at the bottom of any frac list right now.

 

[crj567]

Your the biggest tard ever. Europe is nowhere near as bad off as we are. The S and P has dropped over 40 percent from its highs in 2007!!!!! If memory serves it was at 1547 now it in the 900. Europe and Asia isn't anywhere close to this level of loss. They may drop some more but won't come close to our massive losses. They are using international accountanting laws, under Bush's deregulation WE DO NOT. Therefore we have much less transparency and it is much easier to skim money from here and there so you can get that big NJ sparkly jet.

If you think our entire economy is based on the stock market, and what it does each day, then you may be the 'tard in the room.

Europe is in the suck just as deep-everyone is in for some suck, and when this socialist fool gets into office, you will find out just how bad things can get.

 

[ACL65PILOT]

I agree, but NJA will fair better than the others. But yes, if this lasts they too will get theirs handed to them.

Big is good. It means you are harder to replace.

 

[Flopgut]

Big, new money is screwed. Old money types are going to be OK. There's a huge bailout in place and yet the sentiment is: It ain't enough! I wonder how this would be going if they were given the same bailout we [airline] got?

I think we are going to get to strike, merge or and run our airline careers how we need to.

I would like to see an index for Marquis Jet Card sales in the last week.

 

[Flopgut]

I disagree: Airlines have NOT been through anything like this before. Airlines have already has their respective poopers worn completely out with high oil, now they are about to get slammed by frzen credit markets. Any airline that files BK will liquidate-and fast!

To be clear: The market has lost @50% of its value. This hurts everyone. I am not a big enough idiot to cash out. I am personally dumping just as much in to retirement as always. The point is: the rich are as affected as the poor if not more so.

Which leads me to the following conclusion: The fractionals are going to get completely hammered. Everyone has always assumed NJA is invincible-they are not. Many of the "rich" own small businesses-which are now unable to get short-term credit. Many of these business will fail, and many of their owners will not be "rich" long.

I believe NJA is stronger than the others, but I think fractionals are going to have a very hard time, very soon. The markets get smacked down, and your 10 mil has suddenly turned to 2 mil-you ain't thinking about going to Acapulco for a couple of days-you are thinking about cashing the hell out of NJA.

I do agree that others are in weaker positions, but I would not want to be at the bottom of any frac list right now.

Airlines can't get much worse. Our costs just went down with fuel and the amount of money we need is small-ish.

NJA is going to be OK. They just aren't going to grow. Which I think is perfectly fine with them. There are probably a lot of super rich types who are tired of sharing their "royal barges" with so many others. The days of the 50 thousand dollar transcon occasionalist on a private jet are drawing to a close. They won't quit flying, they'll be back on the airline.

 

[ACL65PILOT]

That is the point.
Good for us. But it is all cyclical isn't it?

 

[climbhappy]

just a month ago, factory orders had risen for 5 straight months. this harbinger was pointing toward a strenthening. the market selloff has simply brought share prices in line with PE ratios. the underlying economic factors are still good. christmas willll suck though for many.

as 9/11 proved video conferencing has its limits. you still need to go see your best customers in person and that will never change. Hence, biz travel in 09 will be stable IMHO.

 

[Max Powers]

If you think our entire economy is based on the stock market, and what it does each day, then you may be the 'tard in the room.

Europe is in the suck just as deep-everyone is in for some suck, and when this socialist fool gets into office, you will find out just how bad things can get.

God I just love you Neoconservative folks...You hate Europeans so much why??? They are still capitalist like the USA. They just use their govt to do things that the private sector has trouble doing - ie Health care, public transportation etc.

And yes much of the economy is based on the Markets. Ever study the great depression and what happened then to the markets? The Markets usually react 6 months earlier than what the real economy is doing. We haven't seen nothing yet!!!!

 

[~~~^~~~]

Your the biggest tard ever.

Our biggest oil field is in our drive way! Average mpg is 22 in the USA in the UK it is 52 mpg........We need a gas tax on automotive gas this will keep demand down and prices low for aviation fuel....

Speaks for itself.

 

[Max Powers]

Speaks for itself.

Yes its called being practical and planning for the future. Adam Smith never worked, we need a happy medium and I say: pushing policies to get people to change their behaviors will save this country from its greed and arrogance.

That is why a man named OBAMA is winning. And yes I can't wait for that to happen...

So Fin what is wrong with Good gas mileage and being efficient? Seriously I'd like to know? Yes you are a tard.

 

[ACL65PILOT]

Nothing is wrong with it, just expecting it to happen with one person or another is.
I think that this country as a whole, republicans included have come to a realization that we as a whole need to change our ways.

No lets stop the political stuff.

 

[Max Powers]

Nothing is wrong with it, just expecting it to happen with one person or another is.
I think that this country as a whole, republicans included have come to a realization that we as a whole need to change our ways.

No lets stop the political stuff.

FINALLY!!!!!!!!!!!! The Dems have been saying that for decades but can't fight the political right to get the legislation past. Finally some Republicans are realizing - Jee by george if we try to become more efficient and pass laws to increase our gas mileages then hey we might reduce our dependence on foreign oil. WOW what a concept.

However, I'm a realist....there will always be a Palin around the corner who thinks Drill baby Drill is the answer and not the problem. I pick my battles and this is a good one. Time to fight the Palins of the world!!!!!!