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UA Exec-Oil Price Rise Could Cause Grounded Planes  
User currently offlineKarlB737 From United States of America, joined Mar 2004, 3105 posts, RR: 10
Posted (6 years 10 months 2 weeks 4 days 5 hours ago) and read 7316 times:

I have been beginning to wonder how the airlines were eventually going to react to this oil price situation. Lets face it they are caught right in the middle. Generally speaking higher ticket prices and/or fewer flight frequencies could be the order of the day. To my fellow A-netters do you know of any other concepts that they could try? For example is their merit to using a larger aircraft to carry more passengers in one flight on some applicable routes? Or just cut frequencies using the same aircraft. And where does reconsideration of turboprop aircraft become a must to compensate. We all know this oil thing is a mess and is out of control and I for one don't see any light at the end of the tunnel for the airlines.

It will be interesting to me how the low-fare carriers handle this as well as the legacy carriers.


Courtesy: Chicago Tribune

United Exec Says Oil Price Rise Could Cause It To Ground Planes

http://www.chicagotribune.com/busine...il-united-capacity,0,2673485.story

Same story from the Associated Press:

http://biz.yahoo.com/ap/071107/united_airlines_oil.html?.v=1

[Edited 2007-11-07 14:53:53]

52 replies: All unread, showing first 25:
 
User currently offlinePhelpsie87 From United States of America, joined Apr 2006, 498 posts, RR: 1
Reply 1, posted (6 years 10 months 2 weeks 4 days 4 hours ago) and read 7231 times:

Not a big surprise...esp when UA was planning oil at a lower price. Or did they reconsider?

User currently offlineN174UA From United States of America, joined Jun 2006, 994 posts, RR: 0
Reply 2, posted (6 years 10 months 2 weeks 4 days 4 hours ago) and read 7211 times:

Nothing new. UA did the same thing back in the late '70s the last time oil spiked. DC-10's and other guzzlers were parked, and then brought back when things calmed down.

Makes perfect business sense.  Smile


User currently offlineJbernie From Australia, joined Jan 2007, 880 posts, RR: 0
Reply 3, posted (6 years 10 months 2 weeks 4 days 4 hours ago) and read 7152 times:

I wouldn't be surprised that once one airline drops frequencies etc the others will follow along pretty quickly, even if they aren't in a crunch at that point they can use the same excuse and to be honest if they can save a few $$ now they may delay/avoid some extra pain later.

Though reality says at some point some flights aren't going to be cost effective, frequency will probably go first to try and get fuller flights and/or be able to reassign some aircraft to different routes where they can be used better.


User currently offline777fan From United States of America, joined Jan 2006, 2501 posts, RR: 2
Reply 4, posted (6 years 10 months 2 weeks 4 days 4 hours ago) and read 7096 times:

Isn't UA's BKK recovery plan based on $50/bbl oil?! WTF? I've noticed that fares have quietly crept up but certainly not at a pace commensurate with oil. Assuming this becomes reality, which aircraft (and routes) would be the first to go? Here at BWI, winter service to ORD calls for more 733 frequencies (vice the 752-dominant summer schedule). Some smaller, mainline markets would inevitably get squeezed by a sudden lack of 737s, assuming of course that they're deemed the most "inefficient" in terms of fuel consumption and pax loads. Is it possible that some mainline routes would be reverted to UAX service?


777fan



DC-8 61/63/71 DC-9-30/50 MD-80/82/83 DC-10-10/30 MD-11 717 721/2 732/3/4/5/G/8/9 741/2/4 752 762/3 777 A306/319/20/33 AT
User currently offlineTan Flyr From United States of America, joined Aug 2000, 1909 posts, RR: 0
Reply 5, posted (6 years 10 months 2 weeks 4 days 3 hours ago) and read 6908 times:

Probably the first to go would be frequencies..might actually help the situation (JFK/ORD/LAX) if fewer flights with larger planes are used.I wonder if there will be enough traffic to warrent alot of the newly skdTATL flying? Alot of cancellations would either free up more767/777's &/or more757 TATL.

The RJ would have to find long narower niches to be cost effective. Short Haul would revert to the next gen turbo-props.

We could see more go bk..maybe the consolidation into 3 mega carriers..American Continental,Delta West,and United Airways..or some other combo.

NO MATTER what, the public will eventually get the short end of the deal.

You know history repeats itself...recession in 1970 when the first 747's came on..then the oil shock of 73-74...now it would be the 380...with an economic downturn globally those operaqtors better have a plan B..or they are in deep Caca.

Could accelerate the 737 composit replacement also..

tht is my quick 2 cents.


User currently offlineTozairport From United States of America, joined Oct 2005, 686 posts, RR: 1
Reply 6, posted (6 years 10 months 2 weeks 4 days 3 hours ago) and read 6844 times:

Quoting KarlB737 (Thread starter):

United Exec Says Oil Price Rise Could Cause It To Ground Planes

Blah blah blah, fear, hear, fear. More junk from arguably the worst management in aviation history. This comes from the same group of idiots that say things like "perish" and "would you rather merge or go bankrupt". Truly, if UA cannot make it after all that it stole from the employees, then it probably doesn't deserve to exist. After a while, one just doesn't really care if there is a wolf or not, so these words from Joke Brace ring awfully hollow...



Meet the new boss, same as the old boss.
User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 59
Reply 7, posted (6 years 10 months 2 weeks 4 days 3 hours ago) and read 6811 times:

Quoting Tozairport (Reply 7):

Blah blah blah, fear, hear, fear. More junk from arguably the worst management in aviation history.

I'm curious to know if they are the so-called "worst management in aviation history" then why do they have one of the better profit margins in the industry lately? Why have they won new routes to China? Why have they opened a successful Middle East route?



"Up the Irons!"
User currently offlinePrebennorholm From Denmark, joined Mar 2000, 6451 posts, RR: 54
Reply 8, posted (6 years 10 months 2 weeks 4 days 3 hours ago) and read 6788 times:

Quoting 777fan (Reply 4):
Isn't UA's BKK recovery plan based on $50/bbl oil?! WTF? I've noticed that fares have quietly crept up but certainly not at a pace commensurate with oil.

Fuel is a significant cost for airline companies. But it is often overrated as such.

On a 1,000 miles sector the difference between crude at $50 and $100 is some $30-35 per pax on a fairly well filled 737 or 320 plane. It doesn't make or break air traffic.

On long range flights the fuel price is more significant, simply because it costs a lot of fuel to transport all that fuel. On an 8,000 miles sector the difference would be more $400-500-ish.

When the average Mr. or Mrs. Earth citizen spends one dollar (excluding taxes) on oil products, then he/she spends 3 cent on jet fuel. For the average EU citizen it is 2.5 cent.

We suffer a lot more by the 97 cent getting inflated by 100%.



Always keep your number of landings equal to your number of take-offs, Preben Norholm
User currently offlineMultimark From Canada, joined Jul 2006, 796 posts, RR: 0
Reply 9, posted (6 years 10 months 2 weeks 4 days 3 hours ago) and read 6767 times:

Quoting KarlB737 (Thread starter):
I have been beginning to wonder how the airlines were eventually going to react to this oil price situation. Lets face it they are caught right in the middle.

That should be amended to how the "US airlines were eventually going to react". The depreciating US dollar has made it very difficult for them to cope, whereas Canadian carriers (and others with appreciating currencies) are having the increase in fuel prices offset by their increased purchasing power.


User currently offlineUnknownUser From , joined Dec 1969, posts, RR:
Reply 10, posted (6 years 10 months 2 weeks 4 days 3 hours ago) and read 6735 times:

Quoting Prebennorholm (Reply 9):
On a 1,000 miles sector the difference between crude at $50 and $100 is some $30-35 per pax on a fairly well filled 737 or 320 plane. It doesn't make or break air traffic.

Oh please.  Yeah sure , profit margins are razor thin and 30-35 per pax IS a big deal. It will make or break it.

This whole oil situation is bullshit. It's not that it is costing more to produce oil, it is just that they can make more money. Oil execs = M.F.ers


User currently offlineLightsaber From United States of America, joined Jan 2005, 13130 posts, RR: 100
Reply 11, posted (6 years 10 months 2 weeks 4 days 3 hours ago) and read 6714 times:
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Quoting Prebennorholm (Reply 9):
We suffer a lot more by the 97 cent getting inflated by 100%.

True.

But that cuts down on disposable cash. Thus we buy fewer things.

1. Cut in business travel due to reduced trade.
2. Cut in leisure travel due to we're broke.

But what else are they going to say? "Hey, our customers were HELOC'ing their homes to live like kings and now they're broke and so are many of the salespeople?"  no  That wouldn't be good for the stock price.  Wink

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineEvolv From Canada, joined Jun 2007, 89 posts, RR: 0
Reply 12, posted (6 years 10 months 2 weeks 4 days 3 hours ago) and read 6679 times:

Its probably the start of seeing more train service in North America. HSR will begin to make sense on shorter routes. An example would be YYC-YEG. The Alberta government is considering funding a portion of the capital costs required to run a high speed train between Calgary and Edmonton. A high speed train would most likely mean an end for air service between the two cities (HSR would be much faster, only 80 mins core to core)

User currently offlineTAN FLYR From United States of America, joined Aug 2000, 1909 posts, RR: 0
Reply 13, posted (6 years 10 months 2 weeks 4 days 3 hours ago) and read 6663 times:

Quoting UnknownUser (Reply 11):
This whole oil situation is bullshit. It's not that it is costing more to produce oil, it is just that they can make more money. Oil execs = M.F.ers

yes, we know that is does not cost more to "produce" a barrel of oil, but like it or not it cost more to procure due to a whole list of issues, including futures speculation, fear,war & greed. BTW, did you know that the vast majority of oil in the world is produced by foriegn government owned oil companies?

Maybe yuo should check your facts a bit..but quite a significanr portion of oil to the US comes from places like Mexico, Veaezuela, Saudi Arabia, Indonesia..and the refiners have to pay cash for it.


User currently offlineItsnotfinals From , joined Dec 1969, posts, RR:
Reply 14, posted (6 years 10 months 2 weeks 4 days 3 hours ago) and read 6650 times:

Quoting N174UA (Reply 2):
Makes perfect business sense.

and a great way to renegoitiate lease rates  Smile


User currently offlineEvolv From Canada, joined Jun 2007, 89 posts, RR: 0
Reply 15, posted (6 years 10 months 2 weeks 4 days 3 hours ago) and read 6623 times:

Quoting UnknownUser (Reply 11):
This whole oil situation is bullshit. It's not that it is costing more to produce oil, it is just that they can make more money. Oil execs = M.F.ers

you need to do some reading before posting bull shit. I think there is a good article on CNN money right now about this very topic. I beleive it is called "How much does Exxon pay for oil?" Read it and get your facts straight.

One hint oil companies don't control oil prices. Oil companies are price takers.

[Edited 2007-11-07 16:56:21]

User currently offlineIkramerica From United States of America, joined May 2005, 21532 posts, RR: 59
Reply 16, posted (6 years 10 months 2 weeks 4 days 2 hours ago) and read 6602 times:

Quoting TAN FLYR (Reply 14):
yes, we know that is does not cost more to "produce" a barrel of oil, but like it or not it cost more to procure due to a whole list of issues, including futures speculation, fear,war & greed.

which is why it will collapse just like it has in the past. when inflated prices are based on hysteria and hype, they crash. be it gold, oil, stocks real estate. we've seen stocks and real estate crash or slide, gold and oil are next...



Of all the things to worry about... the Wookie has no pants.
User currently offlineApodino From United States of America, joined Apr 2005, 4280 posts, RR: 6
Reply 17, posted (6 years 10 months 2 weeks 4 days 2 hours ago) and read 6559 times:

United recently started hiring pilots off the street again. If they end up parking 100 planes, I don't see how they avoid furloughs again. I hope this doesn't happen, but my faith in Tilton gets lower and lower every day (it was never high to begin with)

User currently offlineUnknownUser From , joined Dec 1969, posts, RR:
Reply 18, posted (6 years 10 months 2 weeks 4 days 2 hours ago) and read 6556 times:

Quoting Evolv (Reply 16):
I beleive it is called "How much does Exxon pay for oil?" Read it and get your facts straight.

Yeah, I read that yesterday. recall this?: Of course, with Exxon walking away with over $9 billion in profit for the last three months

Companies should make money. That is what they do and I don't have a problem with them making money. However, $$$9,000,000,000 is wayyyy to much. People and businesses are suffering while oil companies are rolling in the cash.


User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 19, posted (6 years 10 months 2 weeks 4 days 2 hours ago) and read 6538 times:

Quoting Jacobin777 (Reply 8):
I'm curious to know if they are the so-called "worst management in aviation history" then why do they have one of the better profit margins in the industry lately? Why have they won new routes to China? Why have they opened a successful Middle East route?

not to pile on, but UA did have the longest running and most expensive bankruptcy in US airline history and it took 7 years for it to return to a leadership position financially in the industry. UA also got its sole China route because no one else applied. KWI is a good route for sure but other carriers have done equally as good w/ other new routes. I would hardly characterize these thing as evidence UA is well run.

Quoting Evolv (Reply 13):
Its probably the start of seeing more train service in North America.

Trains use fuel too... and the problem w/ the passenger rail is that there are almost no dedicated passenger tracks in the US and freight tracks are already very heavily used. The cost of building rail is far more expensive than the increased cost of oil, since land for new track is very high priced.

Quoting TAN FLYR (Reply 14):
Maybe yuo should check your facts a bit..but quite a significanr portion of oil to the US comes from places like Mexico, Veaezuela, Saudi Arabia, Indonesia..and the refiners have to pay cash for it.

Much of the increase in the price of oil is due to the devaluation of the dollar which has been necessary to keep the US and world economy from sinking due to the subprime mortgage mess. Aviation is, once again, a friendly fire casualty in a much bigger conflict.

And US airlines have generally done a pretty good job of withstanding the increase in oil prices due to strong demand and the reduction of domestic capacity. It's not clear how long that will last, esp. since LFCs continue to add capacity left and right.


User currently offlineSacamojus From United States of America, joined Dec 2006, 228 posts, RR: 1
Reply 20, posted (6 years 10 months 2 weeks 4 days 2 hours ago) and read 6535 times:

I don't see this "problem" of high oil prices going anywhere. The war in Iraq and Middle East instability are no longer the only primary causes for spikes in oil. Rapid growth in China, India, and other growing countries are putting more pressure the price of oil as they continue to demand more. I can't wait to see which country develops and institutues an new energy infastructure not based on fossil fuels.

Back to the airline industry, They will cope whether it is parking planes, consolidation, liquidation, etc.


User currently offlineTAN FLYR From United States of America, joined Aug 2000, 1909 posts, RR: 0
Reply 21, posted (6 years 10 months 2 weeks 4 days 2 hours ago) and read 6524 times:

Quoting UnknownUser (Reply 19):
Companies should make money. That is what they do and I don't have a problem with them making money. However, $$$9,000,000,000 is wayyyy to much. People and businesses are suffering while oil companies are rolling in the cash.

we are off topic, but one final remark about this...maybe you ougfht to ask all the millions of GLOBAL shareholders if they thought that is too much when they get their dividend check? Oil companies in America are owend by stockholders, and I'd bet that almost everyones IRA OR 401k has oil company stock in them.

Maybe all this will be enough to stifle all the elk and bear huggers and we can start to drill in ANWR and produce American oil.


User currently offlineACVitale From United States of America, joined Aug 2001, 922 posts, RR: 10
Reply 22, posted (6 years 10 months 2 weeks 4 days 2 hours ago) and read 6501 times:

This insight I can provide.

On a typical 7 hr sector transatlantic as an example...

B767 - 230 Seats...

Fuel burn at 1650 GPH
7 Hrs Blk
Total Fuel Burn.... 11550 Gallons per segment

2 Segments to Roundtrip = 23100 Gallons

Fuel price per gallon today compared to last year $3.05 p/gal vs. $1.99 p/gal

Difference is $1.06 p/gal x 23100 Gallons = $24,486 per RT flight

230 seats @ 67% load = 155 revenue seats on average

24486 / 155 = $158 addl cost per rev pax...

Hope this helps


User currently offlinePlanespotting From United States of America, joined Apr 2004, 3527 posts, RR: 5
Reply 23, posted (6 years 10 months 2 weeks 4 days 1 hour ago) and read 6377 times:

Quoting Ikramerica (Reply 17):
which is why it will collapse just like it has in the past. when inflated prices are based on hysteria and hype, they crash. be it gold, oil, stocks real estate. we've seen stocks and real estate crash or slide, gold and oil are next...

Exactly - I'm really starting to believe that there is an Oil bubble. I'm not willing to bet all my money on that or anything, but if I were an energy trader, I would definitely start going short on oil now that it's nearing an extreme psychological high.



Do you like movies about gladiators?
User currently offlineNudelhirsch From Germany, joined Oct 2003, 1438 posts, RR: 18
Reply 24, posted (6 years 10 months 2 weeks 4 days 1 hour ago) and read 6365 times:

Anyways, it's a nice way to cover a profit warning without doing so. Stock price will not drop but you warned all of the world of profits to drop deeeeeeeeeep.

Are there some poor numbers UA is going to present? Looks like it. Early finding of a scapgoat...



Putana da Seatbeltz!
25 Ikramerica : There is not an oil shortage or even a run on supply. OPEC could pump more oil if they wanted, and China and Mexico are opening new fields in the Gul
26 Post contains links Joeljack : http://www.marketwatch.com/news/stor...383%2DDA18E142BCFD%7D&siteid=yhoof It says in this article that United will be grounding 13 narrowbody aircraft
27 Post contains images 777fan : Good luck - have you heard of Amtrak?! Should've been out of business yeeeeears ago! It's simple supply versus demand. In reality, nobody gives a hoo
28 Nudelhirsch : The bubble will only not collapse because the USD is weak compared to other currencies. It's a shame actually. But the import power of other countries
29 57AZ : Not really. Capacity can be improved by additional technology that is being developed. Also, many railroad right of ways are sufficiently large to al
30 Gigneil : You realize than ANWR stands for Arctic National Wildlife Reserve, right? Who the hell needs a source for knowing that air flows from the polar areas
31 ANother : Do you have a source for this? (I'm not arguing, I just would like to look at the evidence here) Thanks!
32 Evolv : It has done poorly in an era when oil was cheap. We can't use past sucesses or failures to analyse current market conditions. We have never had oil a
33 Bennett123 : Train service also works for other reasons, population density for instance.
34 Rbgso : Yes, thank you, I was well aware of that. There would be no refining operations in the arctic, that would be cost prohibitive. Drilling and transport
35 Post contains images UAL777UK : Yawn, getting boring with this 3 years in Bankruptcy business...sure they were, christ, it was just after 9/11, Afganistan, Iraq, Jeez, need we go on
36 LTBEWR : What may be the first things will be fewer seats on each flight being sold at heavily discounted advance fares to the general public, lower discounts
37 Post contains images Keesje : Imagine some aircraft sales person telling Jake Brace they won't bring out a new narrowbody for the next ten years because their backlogs are ok and t
38 B6MoneyGuyJFK : Part of the problem is that the price of oil is based on US dollar per barrel. A weak dollar means that a barrel of oil has less value than a strong d
39 Mcdu : What was DL's and NWA's BK exit predicated on? Did you notice that UAL made half a billion dollars in the last quarter? Gas was more than 50bbl at th
40 SPREE34 : Could you elaborate? Feel free to continue with the colorful metaphors, but elaborate please. What was the Profit Margin? You state a dollar figure t
41 RDUDDJI : UA poorly run...not if you are a stockholder! I'll take reporting record profits! False. UA beat out all competitors in winning IAD-PEK last year. Eve
42 Soon7x7 : GLOBAL OIL BLUNDER...If the Mideast has such an oil crises, then why and how can Emirates, Jet Airways,Qatar,etc all of the sudden start up these high
43 Post contains images Jacobin777 : ..that's huge given the thousands of flights/per week which meet that criteria. 30%-35% of costs for many carriers and its doubled the past year coup
44 DC8Fanjet : I think everyone was in so much of a hurry to "jump on United", that the entire point of the comments was missed. All Jake Brace said was that, IF the
45 UAL777 : Actually, the shorter the stage length, the WORSE it is in the long-term. In an 8 hour period, the long-haul aircraft is making 1 take-off and landin
46 Post contains images Bmacleod : Parking aircraft is one option, though quite expensive as well. I'm assuming quite a few 744s will wind up in MZJ or Mojave. UA really must look at th
47 Flighty : I think so too. UA needs some 777s and possibly (as you say) 773ERs. But their worst 744 lines must surely be bleeding red ink right now. He is talki
48 YULWinterSkies : Maybe they were not planning the $ at such a low rate... After all, oil is not that much more expensive north of the border...
49 TAN FLYR : However, those might be the ones you would want to fly as they are "paid for"..IF UA has a clause in the leases to get out with XX days notice, they
50 Viscount724 : Fuel as a percentage of total operating expenses is normally much lower on shorthaul flights than longhaul. Other costs like airport charges, landng
51 Flighty : Actually for a heavily international airline, with many customers in Europe, a low dollar can allow UA to become a more efficient carrier than say Lu
52 Swaluvfa : We (the employees) received this email from Mr. Jack Brace clarifying today's media reports. Quoting Mr. Brace: "Good evening. By now, many of you hav
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