Fuel costs threaten to bankrupt airlines

[brooklynite]

Source: Crain's New York Business

Several large airlines will likely be forced into bankruptcy by the end of the year, according to a study released Thursday.

If oil prices continue to hover at around $130 a barrel, all the major airlines will be in default on various debt covenants within the next eight months, according the report by the Business Travel Coalition and industry consultant Airline Forecasts.

The report looked at debt obligations and revenue trends for all 170 carriers operating in the United States.

“The elephant in the room is that these carriers are going to be at risk of bankruptcy by the fourth quarter of this year or the first quarter of next year,” said Kevin Mitchell, chairman of the Business Travel Coalition, a trade group for corporate travel planners.

Read more: http://www.crainsnewyork.com/apps/pbcs.dll/article?AID=/20080613/FREE/656396903/1066/newsletter01

[Vincardog]

1. How is the GOP agenda working out for YOU?

[SergeyDovlatov]

8. I am grateful to democratic leadership for supporting it...

Every time we are passing emergency approriation bill to fund the war, federal reserve prints more money to fund the gov't deficit and inflating the dollar even more.

[Vincardog]

13. Then you agree it is time to send the GOP and the DINOs to the corn field

[SergeyDovlatov]

14. Absolutely. Kucinich for the speaker of the house!

[liberal N proud]

15. Don't send them to the corn field

They will eat all the corn or turn it to ethanol.

We need to feed the world.

[FloridaJudy]

23. I think that's a reference

To one of the more memorable "Twilight Zone" episodes. Creeped me out so bad I couldn't sleep for two nights.

Now I wish I had one of those "cornfields".

eta link: http://www.halcyon.com/jmashmun/npd/goodlife.html

[Hydra]

2. The GOP-

Bringing America to a halt.

[madrchsod]

3. only the rich are entitled to fly

the rest can fend for themselves

[ladjf]

4. This is the grim "tip of the iceberg".

If airlines and truckers shutdown, the economic collapse will be worse than anyone could imagine.

It will happen unless the price of oil starts down soon.

[margotb822]

5. Future generations will hear stories of airplanes

We'll be telling our grandkids about how we used to fly all over the world like it was no big deal.

[L. Coyote]

6. More effective than the Clean Air Act!!!

[lovuian]

7. Business as we know it is going to change

they will be conference calls more and more

[SergeyDovlatov]

9. self-delete. Misunderstood the OP point

[CountAllVotes]

12. think about it

people won't be going to jobs anymore if they can do the job from their home. No need to appear in person at some job where no one goes for "service" any more.

The ramifications are beyond comprehension.

Take a step back to c. 1900. Those were mighty interesting times IMO.

Perhaps the best is yet to come! High speed trains, electric/hydrogen run boats, ships, etc. The possibilites are indeed endless. I see it as a a new era we are being forced into, like it or not.

[regnaD kciN]

10. Most major airlines are in and out of bankruptcy...

...every year or so. Then they get a recovery plan approved by the court and are out again.

This current situation may cause a few carriers to merge, but it's highly doubtful that you'll see widespread closures. Even a rise to $150/barrel or so can be handled with another, say, $20 increase in the average fare (or charging people that much to check a bag) that most people won't care about or even notice.

If there's any major change you might see, it will be the cutting back of schedules (say, instead of 12 flights a day between SF and LA, going to 8) to make sure all flights are filled rather than some being half-empty. This might also mean fewer flights on "regional jets" instead of full-size aircraft...a move that will only help the congestion and flight-delay problem.

[Turn CO Blue]

29. YIKES! Wish it were that easy. The airlines can't sell those

dozens and dozens of planes that they have grounded, or get anyone else to take up the leases. There will be a glut of 100's of airplanes this year - each worth $30M to $60M dollars - and no takers.

That means LIQUIDATION and CESSATION, not reorganization and emergence.

Doubtful that anybody is coming out of bankruptcy THIS TIME, because the bankers/vendors will only want to liquidate. What good would it be for the bankruptcy committees to recommend staying in a tanking industry? What good will DIP financing do - just prolong the inevitable. All the vendors on the committee, (except the fuelers and the airplane makers) will prefer and vote for getting some pennies on the dollar to liquidate - that'll be better than getting NOTHING - which is what they'll get if they try to emerge with fares and fuel the way it is now.

United Airlines posted a $537M dollar loss last quarter Q1 2008 AND THAT WAS BEFORE, BEFORE, BEFORE oil had bumped $100 per barrel! They only have $2B in the bank. And oil is bumping $140 per barrel now. Try your math on that picture, and you'll see how urgent this situation is.

Thirty communities have already lost service since January - their airports are sitting vacant like ghost towns. Not a single airline can affort to fly out of them, and the customer wouldn't be able afford the fare for what the jet fuel would cost to haul a 170 pound person on a flight - if they were charged what it REALLY costs.

Another 70 to 100 communities will lose service in the next six months. More vacant airports. More airport businesses having to close. More cities that will begin to die without a viable airport to attract companies and industry.

You mention regional carriers. Ha! There won't be a regional carrier left in business within six months. They're all reporting dreadful numbers and they're tanking. You think fuel prices will level out?

Every time a plane is grounded, that's THAT much less cargo, freight and US Mail being shipped around every two hours (you don't think airlines only carry people?)

Thousands of airline employees losing jobs - where else are they going to work? Everytime there's a merger, thousands more employees are let go due to duplication and to ease the merger of several unions.

Once capacity gets low enough (once the frequency and the number of seats drops), the fares will be astronomical. Once there are only a couple of airlines (because they're all gone or have all merged into 2-3 gigantic dinosaurs), they will have monopolies on every major market and the fares will skyrocket. They want fly to the minor markets - because they won't want to. Do you remember how American and United didn't service small towns in the 40s and 50s? Why should they - they only have to worry about the wealthy at that point. They don't need "full" planes, if the fare is high enough. No money in it.

All it will take is ONE HURRICANE near a refinery (doesnt' have to be a direct hit, just near it) and jet fuel jumps to $6 or $7 per gallon and the industry just STOPS.

I feel that the only way to preserve air travel is emergency re-regulation and for the industry to become part of the government and be subsidized like all other forms of public transportation. Model it after Qantas and British Airways.

[Doctor Cynic]

11. At least we have high speed rail to take...oh wait...

[Indenturedebtor]

18. Trains! Need Trains *Best Zombie Voice* n/t

[paparush]

27. What do we want? TRAINS! When do we want them? TRAINS!

[djp2]

16. Economy out of control as Dems take office

Let's see..Oil companies make out like bandits, Inflation will be raging again, Economy in the toilet, Dems get the blame, Repukes are happier than ever. Is this a set up that just NOW oil prices are going through the roof?

[Phred42]

17. Phuck 'em - Start using the Trains

[Hulk]

19. Bad news, but hey....your oil stocks are going up, right?

Yup, I've watched the flights from Portland, Oregon to Mexico City go from @ $400 rt to @ $700+ This is crazy. The airlines are charging for second bags, and AA is even charging for the first bag of luggage now.

When does this madness stop?...when the oil companies have ALL OF OUR MONEY???

[Trajan]

39. The Right Wing dislikes the redistribution of wealth ....

UNLESS ...

The redistribution is funneled into THEIR pockets ... Then it's hunky dory ....

[DemoTex]

20. Meanwhile, DUers get their shorts in a knot over US Airway's $2 soda.

And checked bag fees. These are just other ways to pay the fuel bill in order to stay in business until sanity returns to the White House and the energy markets. As an airline pilot, this is not really hard for me to understand.

[Turn CO Blue]

32. I think we've talked before. I'm airline too. Hope we make it!

:cheers:

[darue]

21. GOOD. shut it ALL down. that's the only way things are going to change. n/t

[HughBeaumont]

22. Like it's been said on here before: is there a future for air travel?

I like flying, but let's face it: I don't forsee future planes running on solar, electric or battery power.

[ret5hd]

45. The new "hot stocks" are in the rubber band industry.

[busymom]

24. Oh, don't worry...

We Americans who work are expected to save money for the leaner times and have to fight to be able to file for bankruptcy if healthcare costs, high fuel costs and inflation ruins us financially....but I'm sure our government will bail out the airlines yet again. I have no doubt that the airlines will hire even cheaper unskilled labor and the CEOs will give themselves multi-million dollar raises as a pat on the back too!

[Turn CO Blue]

31. I know you're being cavalier - but there are a lot of airline employees

on DU.

I work for a low-cost carrier, a good one, and I've invested 25% of the years of my life and my heart and soul into this company.

There ain't gonna be a government bailout - so you can stop your worrying. Unfortunately, my worrying continues. For now. Til the shoe drops.

But when there is zero air transportation out of several hundred smaller communities, and when those communities with vacant airports die due to lack of viability, you'll see what this cascade of having lost the small and middle airlines (who won't be bailed out in time, if any are...) will do to the economy of both passenger and cargo/US Mail shipping. Then what that loss will do to the economy overall.

It may be true that the giant airlines have CEOs with golden parachutes, but not the dozens of smaller airlines. Hell, our officers couldn't even get the judge to approve a severance capped at $140K for our bunch. So they'll get NOTHING, even a couple of them that invested 10 years and crawled up from starting on the ramp or cleaning airplanes - YES THAT'S TRUE.

I started cleaning planes, and worked my way up over 10 years to database admin. All that work.

It's a very sad time in my life, but hey, as long as the government doesn't bail us out, everyone who has ever had a bad experience on an airline is happy. Goody effing goody for you. Just wait til you need go to a funeral with a day or two's notice in 3-4 years. It's gonna cost you - IF there are any airlines left.

Of course, AmTrak and Qantas and British Airways are partly or wholly subsidized by their governments (it's a little thing they like to call PUBLIC TRANSPORTATION - maybe you've heard of it? -- which liberals are supposed to be in favor of). But whatever.

[busymom]

37. My dad worked for the airlines for 20 years...

He worked as a pilot for American Airlines....He accepted pay cuts, cuts in benefits and all kinds of crap repeatedly and he did it because he loved flying and was proud to work for the airlines. Before he retired though, he was disgusted. The top dogs really do have golden parachutes and while he was being asked to cut back, they were stuffing their pockets.

If the govt. is going to bail out big business, then they should also be prepared to help out the rest of us...

[Turn CO Blue]

38. major airlines like AA and low-cost carriers are SO

different that you're talking about a completely different industry. Apples and oranges. They have NOTHING to compare to each other. My CEO makes $150K per year - not $10M. Our VPs make $100K. It's the same for all the low-cost carriers. And our VPs don't have any parachute at all, much less a golden one. You don't know what you're talking about. Major airlines and some experience with AA from years ago, HAS NOTHING TO DO WITH THE MODERN LCC INDUSTRY. Your dad probably made $250K with AA. Our pilots start at $48K.

Once the airlines fail, small like us with only 50 aircraft, or large like UA, then the entire trucking industry will fail next.

[busymom]

46. Maybe...

this will be an opportunity for smaller carriers to get a good foothold in the market? My dad started out at a small carrier, btw after serving in the military (including flying in Vietnam). I feel more sympathy for the smaller carriers than I do for the larger ones...probably because they have the golden parachutes and so many financial resources and they haven't saved for leaner times. I think they are partly to blame for their predicament...the smaller carriers are a different industry.

[Terry in Austin]

25. Air travel is SO twentieth-century!

Basically, a stunt that got way out of hand.

Hey, I like flying on an airplane... and water-skiing, and roller coasters, etc. Most people do, I'd guess. But that doesn't mean turn it into the main mode of public transport, for pete's sake. So it's about time the airlines folded.

Trains are the future of transportation -- time to modernize!

[KamaAina]

34. Sadly, the line out here has been out of service for some time now

no word yet on when the bridge from SF might be completed. :-)

I actually heard about a woman who called her travel agent and asked if Amtrak had any packages to Hawai'i! :rofl: :dunce:

[happygoluckytoyou]

26. SOLAR PANELS ON AIRFORCE 1...... i love a cloudy day

[SCUBARACK]

28. Except for Southwest Airlines

They speculate on oil in case it goes up, which of course causes it to go up.

[Turn CO Blue]

30. Very worried. Spent 25% of my life at my small airline -

Just waiting for the other shoe to drop.

sigh.

[bikebloke]

33. How many of those poor, poor executives...

Will still walk away with millions, while the rank and file are shoved out into the cold.

*Though I read somewhere that the honchos at one airline are working without pay to keep the airline going. Now they're good guys.

[dixiegrrrrl]

35. What about all those airline miles people have obsessively saved

and is this why it is taking longer and longer for mail to travel across the country?
How are Fed-Ex and Amazon and all those online stores going to get their goods out?

I noticed 3 tv commercials this week for CSX railroad..

wonder what their stock is doing?

[Heywood J]

36. Airplanes should really have been the mode of choice for off-continent travel only.

If this country had spent money on creating a modern high-speed rail infrastructure, you would be able to travel anywhere in ten to twelve hours - the same as it takes via plane, by the time you factor in getting to the airport, finding parking, checking in, and the strip-search.



Plus, you don't have to worry that someone's going to break into the locomotive cab with a box-cutter and demand the train be taken to Cuba, or driven into a landmark. God forbid, we might be able to bring more than three ounces of liquid on the trip...

[melm00se]

40. quick solution to the problem

raise prices to mirror the increase in costs and, if necessary, trim back other costs if/when business drops off.

damn, I ain't even an MBA and I figured that one out.

BTW, for those of you who don't remember: once upon a time (back in the 80's and before) flying was something extra special and you knew a lot of people who had never flown. Now a days, flying is almost as commonplace as going to the grocery store.

[Honeycombe8]

41. And, still, some pilots are striking this week. (Against Delta, is it?) For perks...

they gave up under contract negotiations previously. Sheesh. Talk about your bad timing.

[nwliberalkiwi]

42. Dead and Gone

America is dead, the people just haven't realized the fact!!!!!!!!!!!!!! Bad choices---now the chickens have come home to roost. Can you say beyond the tipping point. It's over, turn out the lights!!!!!!!!!!!!!!!!!!!!!

[Terran]

43. Short term, this is going to be very bad for other industries

such as anything related to hospitality and recreation. If people can't afford to fly, much less drive to a vacation destination, tourism will go the way of the dinosaur. The entire hotel industry will fall like a house of cards if the airline industry collapses.

It occurs to me that tourism as we have understood it in the second half of the 20th century, is something new--a product of personal transportation, cheap fuel and the invention of flight. Before that, only the wealthy traveled for pleasure, and for the foreseeable future, that is how it will be again.

[raccoon]

47. That is a remarkable insight.

"It occurs to me that tourism as we have understood it in the second half of the 20th century, is something new--a product of personal transportation, cheap fuel and the invention of flight. Before that, only the wealthy traveled for pleasure, and for the foreseeable future, that is how it will be again."

[NickB79]

44. Yet another Peak Oil prediction comes true

I will always fondly remember my one and only round-trip flight last year. It makes me sad that my future children and grandchildren will never know the excitement of cruising 30,000 miles in the sky at 500+ mph, or seeing distant, exotic foreign lands :(