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Oil Hits Approx. $114-Merger Effects  
User currently offlineIloveboeing From United States of America, joined Oct 2005, 796 posts, RR: 0
Posted (6 years 5 months 5 days 3 hours ago) and read 2622 times:

Oil has reached approximately $114.

http://news.yahoo.com/s/ap/20080415/ap_on_bi_ge/oil_prices

Now that DL/NW have announced their merger, will the continual rise in oil prices cause a more rapid response (merger announcement) from UA/CO and maybe LCCs, like WN/FL, B6/F9?

24 replies: All unread, jump to last
 
User currently offlineEXAAUADL From , joined Dec 1969, posts, RR:
Reply 1, posted (6 years 5 months 5 days 3 hours ago) and read 2623 times:

I;d love to know how a merger allows airlines to deal with higher fuel prices? oh yes, the magically and permanent capacity reduction and higher airfrares...

User currently offlineSurfrider1978 From United States of America, joined Jan 2008, 292 posts, RR: 0
Reply 2, posted (6 years 5 months 5 days 2 hours ago) and read 2546 times:

Oil is just getting rediculous. When are governments worldwide going to get fed up and throw a flaming torch up OPECS ass? Oil is going to KILL the global economy....!

User currently offlineEXAAUADL From , joined Dec 1969, posts, RR:
Reply 3, posted (6 years 5 months 5 days 2 hours ago) and read 2525 times:



Quoting Surfrider1978 (Reply 2):
Oil is just getting rediculous. When are governments worldwide going to get fed up and throw a flaming torch up OPECS ass? Oil is going to KILL the global economy....!

this is mostly caused by speculators and the weak dollar. There is more gasoline in storage right now inthe USA than at anytime since 1993. What we need for cheaper oil are much higher taxes on speculators and higher interest rates


User currently offlineIloveboeing From United States of America, joined Oct 2005, 796 posts, RR: 0
Reply 4, posted (6 years 5 months 5 days 2 hours ago) and read 2525 times:



Quoting Surfrider1978 (Reply 2):
Oil is going to KILL the global economy....!

Not all economies. The Russian economy has been booming because of the high oil prices. Might be good for SU......


User currently offlineLAXintl From United States of America, joined May 2000, 25357 posts, RR: 49
Reply 5, posted (6 years 5 months 5 days 2 hours ago) and read 2492 times:



Quoting Surfrider1978 (Reply 2):
When are governments worldwide going to get fed up and throw a flaming torch up OPECS ass?

For starters, OPEC does not control the price of oil, its decided on the open market. Secondly OPEC members only represents about 40% of global oil production.

Lastly, the recent run up in pricing has more to do with the decline of dollar, which today again set a record against the Euro. So in essence the price has not increased as much in real terms, its simply the shift in dollar value thet makes it more expensive when viewed in dollar terms.



From the desert to the sea, to all of Southern California
User currently offlineFreequentFlier From United States of America, joined Feb 2007, 900 posts, RR: 12
Reply 6, posted (6 years 5 months 4 days 19 hours ago) and read 2268 times:



Quoting LAXintl (Reply 5):
For starters, OPEC does not control the price of oil, its decided on the open market. Secondly OPEC members only represents about 40% of global oil production.

This is not entirely correct. OPEC is a cartel, and thus DOES influence price. OPEC members collude together to restrict output and thus increase prices.


User currently offlineBreaker1011 From United States of America, joined Nov 2007, 938 posts, RR: 2
Reply 7, posted (6 years 5 months 4 days 18 hours ago) and read 2192 times:



Quoting FreequentFlier (Reply 6):
This is not entirely correct. OPEC is a cartel, and thus DOES influence price. OPEC members collude together to restrict output and thus increase prices.

The point is that OPEC isn't responsible for what's happening to our price of oil. The continued absurdity of the US government's monetary policy is 100% responsible for where we are today. Right now our policies continue to devalue to the dollar against foreign currencies and the Fed shows no signs of letting up - nor does the current administrations policy on the trade deficit and debt they've allowed to built back up again in 8 short years of misguided governance. In fact not only do they refuse to acknowledge accountability for our current disaster, but now our elected hero's are ready to further depress the dollar's value by bailing-out suckered homeowners from their "I knew I couldn't pay it, but did it anyway" mortgages, using MY TAX DOLLARS, and in conjunction, will likely keep lowering interest rates to even further unsustainable levels.

We in this country have done this to ourselves. I really don't want to sound like a cynic, but it's really starting to wear on me hearing all the "woes" from my patients that have absolutely dug themselves into a pit of financial despair, yet feel they deserve to be bailed-out for their greed. Mind you, this is while they are looking for cosmetic plastic surgery to make themselves "feel better" about things.

We continue to be a country with too many (note, not all of us) debt laden, artificially and unsustainably-high lifestyle-oriented citizens that refuse to take responsibility for their own actions and feel entitlement to our gas-hungry SUV's and our $7 Starbucks. As a nation, we'll eventually pull out of it, but it will take a new White House with a real plan and alot of pain over the next two years before you see the dollar start to recover. Then, only then, will you see oil settle down in the US (but never back to where it was). At this point, we frankly deserve oil at $150 a barrel just for having poked fun at Europeans for driving around in microcars for the last two decades due to their relative price of oil, while we joyously let the automakers sell us $40K fuel-burners with reckless regard for our future.

Whew, very sorry. I really am a positive guy, I just need another scotch. The situation just makes me angry and people DESPERATELY NEED to start blaming this mess on those that deserve the blame in our own government and financial institutions, instead of some unseen and therefore easy to smack-on cartel some 9000 miles away. Instead, we beleive every single word we hear about the "congressional inquisitions of Exxon-Mobil" and the "leak in a TN pipeline" as evidence of our "concerned government."



Life's tough. It's even tougher if you're stupid. J. Wayne
User currently offlineIloveboeing From United States of America, joined Oct 2005, 796 posts, RR: 0
Reply 8, posted (6 years 5 months 4 days 18 hours ago) and read 2160 times:



Quoting Breaker1011 (Reply 7):

We continue to be a country with too many (note, not all of us) debt laden, artificially and unsustainably-high lifestyle-oriented citizens that refuse to take responsibility for their own actions and feel entitlement to our gas-hungry SUV's and our $7 Starbucks.

Yes, we've brought it on ourselves. Also, a lot of the people that complain about the environment and high gas prices are the same people who drive SUVs.

This can relate to the airlines, as well. They need to have the most fuel-efficient aircraft available, and a lot of them missed the boat, as the production lines at Boeing and Airbus are at or near capacity. They also need to get rid of the gas guzzlers, which means that DL/NW needs to retire their DC-9s and MD-88s, AA needs to retire their MD-82s/83s, UA needs to retire their 733s/735s, etc.


User currently offlineLAXintl From United States of America, joined May 2000, 25357 posts, RR: 49
Reply 9, posted (6 years 5 months 4 days 18 hours ago) and read 2149 times:



Quoting FreequentFlier (Reply 6):
OPEC members collude together to restrict output and thus increase prices.

Yes members set production outputs, however no one is crying out that there is a global shortage of oil.
Matter of fact oil stock piles in most countries are fine, while US seems to experience a bottle neck in refining capacity not actual fuel availability.

Anyhow for the record last summer for the first time to calm markets, OPEC publicly stated that its target price for crude is $70/bbl.
http://www.forbes.com/markets/feeds/afx/2007/08/28/afx4060633.html
Regardless OPEC cant help the continued drop in the dollar value viewed against other currencies.



From the desert to the sea, to all of Southern California
User currently offlineFreequentFlier From United States of America, joined Feb 2007, 900 posts, RR: 12
Reply 10, posted (6 years 5 months 4 days 18 hours ago) and read 2121 times:



Quoting Breaker1011 (Reply 7):
We in this country have done this to ourselves. I really don't want to sound like a cynic, but it's really starting to wear on me hearing all the "woes" from my patients that have absolutely dug themselves into a pit of financial despair, yet feel they deserve to be bailed-out for their greed. Mind you, this is while they are looking for cosmetic plastic surgery to make themselves "feel better" about things.

We continue to be a country with too many (note, not all of us) debt laden, artificially and unsustainably-high lifestyle-oriented citizens that refuse to take responsibility for their own actions and feel entitlement to our gas-hungry SUV's and our $7 Starbucks. As a nation, we'll eventually pull out of it, but it will take a new White House with a real plan and alot of pain over the next two years before you see the dollar start to recover. Then, only then, will you see oil settle down in the US (but never back to where it was). At this point, we frankly deserve oil at $150 a barrel just for having poked fun at Europeans for driving around in microcars for the last two decades due to their relative price of oil, while we joyously let the automakers sell us $40K fuel-burners with reckless regard for our future.

While I'll be the last person to defend government bailouts for people who took out mortgages they couldn't afford simply because they felt they "deserved" a McMansion, the original point was that OPEC has no effect on oil prices. But we know that OPEC does have some degree of control of oil prices. The fact that they set a price target at all is indicative of the fact that they know they have an affect on prices.

But yes, of course, US monetary policy is also to blame, and the Fed seems so busy cutting interest rates, it has completely forgotten about inflation and the US dollar.


User currently offlineTranspac787 From United States of America, joined Jul 2007, 3208 posts, RR: 13
Reply 11, posted (6 years 5 months 4 days 18 hours ago) and read 2107 times:



Quoting EXAAUADL (Reply 1):
I;d love to know how a merger allows airlines to deal with higher fuel prices? oh yes, the magically and permanent capacity reduction and higher airfrares...

So?? This ensures the survival of the company. They run a business, and they will maximize profits. What is so incomprehensible about this to you??


User currently offlineAirPortugal310 From Tokelau, joined Apr 2004, 3634 posts, RR: 2
Reply 12, posted (6 years 5 months 4 days 18 hours ago) and read 2087 times:



Quoting Transpac787 (Reply 11):
So?? This ensures the survival of the company. They run a business, and they will maximize profits. What is so incomprehensible about this to you??

Blows for the consumer and works out (hopefully) for the business....

in theory of course

There is nothing wrong with this of course. I agree with you



I sell airplanes and airplane accessories
User currently offlineBreaker1011 From United States of America, joined Nov 2007, 938 posts, RR: 2
Reply 13, posted (6 years 5 months 4 days 18 hours ago) and read 2075 times:



Quoting Transpac787 (Reply 11):
So?? This ensures the survival of the company. They run a business, and they will maximize profits. What is so incomprehensible about this to you??

I agree with you. Everyone is demonizing the DL/NW merger for driving up fares and expunging capacity. Exactly what does everyone thing they should do instead?? The price of Coffee and Milk have outpaced airfares by 4:1 inflationwise in the last 10 years, and people don't think that airfares need to go up? Geesh. More of that good old consumer entitlement. "I oughta be able to fly anywhere I want for $99 or less, and if I can't then the industry is RAPING me and doing a public disservice."  banghead 

I think DL/NW is conducting itself with some brilliance right now. From a "permanent reduction in capacity" standpoint, their timing simply could NOT be better. In normal times, any capacity reduction by a legacy, per se, is swiftly eaten-up by an LCC, and the vicious circle starts all over again. Today, the LCC's are feeling as much pain as the legacies are and maybe moreso thanks to the legacies managing to come much closer to LCC costs in BK. So when a DL/NW rationalizes it route system and cuts out capacity, there are fewer and fewer LCC planes to move around the country and chase after those markets.

At no other time in history has the notion of "permanent capacity reductions" had as much of a chance at being at least "semi-permanent" as it does right now.



Life's tough. It's even tougher if you're stupid. J. Wayne
User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6183 posts, RR: 34
Reply 14, posted (6 years 5 months 4 days 17 hours ago) and read 2045 times:



Quoting FreequentFlier (Reply 10):
But we know that OPEC does have some degree of control of oil prices.

Not any more!!!!

Quoting FreequentFlier (Reply 10):
But we know that OPEC does have some degree of control of oil prices. The fact that they set a price target at all is indicative of the fact that they know they have an affect on prices.

The fact that they have a target of $70 and the price of oil has reached $114... over 62% higher than their target price... clearly shows that they no longer have control.

Quoting Breaker1011 (Reply 13):
I agree with you.

And I agree with you!!



Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 59
Reply 15, posted (6 years 5 months 4 days 17 hours ago) and read 2010 times:



Quoting Surfrider1978 (Reply 2):
Oil is just getting rediculous. When are governments worldwide going to get fed up and throw a flaming torch up OPECS ass? Oil is going to KILL the global economy....!

..how about venting all that energy at SUV drivers and the such?

Also, compared to places such as the United Kingdom, we still get gas for a much lower price.

Quoting EXAAUADL (Reply 3):
What we need for cheaper oil are much higher taxes on speculators

..who are the "speculators"?

Quoting EXAAUADL (Reply 3):
higher interest rates

...that I agree with..

Quoting FreequentFlier (Reply 6):

This is not entirely correct. OPEC is a cartel, and thus DOES influence price. OPEC members collude together to restrict output and thus increase prices.

Even though OPEC isn't as much control as they used to be, its still business...if you were a member of OPEC what would you do?

Quoting Breaker1011 (Reply 7):
The continued absurdity of the US government's monetary policy is 100% responsible for where we are today.

 checkmark 

Quoting Iloveboeing (Reply 8):
Yes, we've brought it on ourselves. Also, a lot of the people that complain about the environment and high gas prices are the same people who drive SUVs.

 checkmark 



"Up the Irons!"
User currently offlineTranspac787 From United States of America, joined Jul 2007, 3208 posts, RR: 13
Reply 16, posted (6 years 5 months 4 days 17 hours ago) and read 2003 times:



Quoting Jacobin777 (Reply 15):
..who are the "speculators"?

NYMEX traders. Trade up the price of oil in anticipation of any potential shortages and the like.


BTW where have you been?? All is well though, we can rest assured it is still the same person on your end as you are still melting down the period key  Wink

Quoting Jacobin777 (Reply 15):
..how



Quoting Jacobin777 (Reply 15):
..who



Quoting Jacobin777 (Reply 15):
...that

 duck 


User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 59
Reply 17, posted (6 years 5 months 4 days 16 hours ago) and read 1964 times:



Quoting Transpac787 (Reply 16):
Quoting Jacobin777 (Reply 15):
..who are the "speculators"?

NYMEX traders. Trade up the price of oil in anticipation of any potential shortages and the like.

....considering I trade/invest oil for my investors, I've noticed the "smaller guys" can't really change the markets as much as the "Big Boys" can..they drive 80% of the markets... yes 

Quoting Transpac787 (Reply 16):
Quoting Jacobin777 (Reply 15):
..how



Quoting Jacobin777 (Reply 15):
..who



Quoting Jacobin777 (Reply 15):
...that

 duck 



Quoting Transpac787 (Reply 16):
BTW where have you been?? All is well though, we can rest assured it is still the same person on your end as you are still melting down the period key  Wink

..self-imposed ban... Smile



"Up the Irons!"
User currently offlineChiad From Norway, joined May 2006, 1150 posts, RR: 0
Reply 18, posted (6 years 5 months 4 days 16 hours ago) and read 1942 times:



Quoting Iloveboeing (Thread starter):
Oil has reached approximately $114.

He he. I can easily remeber when oil had a price of $19 per barrel.

Quoting Iloveboeing (Reply 4):
Not all economies. The Russian economy has been booming because of the high oil prices. Might be good for SU......

The Norwegian economy is also benefitting well from this. But dont think fuel is cheap in Norway because of it.
This monday the price per litre at the gas station was Kr 12.90 (about US$ 10.2 per US Gallons)


User currently offlineMBJ2000 From Germany, joined Dec 2005, 426 posts, RR: 0
Reply 19, posted (6 years 5 months 4 days 15 hours ago) and read 1904 times:



Quoting Jacobin777 (Reply 15):
Also, compared to places such as the United Kingdom, we still get gas for a much lower price.

It's €1.40/liter at the moment in Germany, that's about $8.50/gallon. Just for comparison...



Like most of life's problems, this one can be solved with bending -- Bender Unit 22
User currently offlineConnector4you From Canada, joined May 2001, 932 posts, RR: 2
Reply 20, posted (6 years 5 months 4 days 15 hours ago) and read 1900 times:



Quoting Transpac787 (Reply 11):
Quoting EXAAUADL (Reply 1):
I;d love to know how a merger allows airlines to deal with higher fuel prices? oh yes, the magically and permanent capacity reduction and higher airfrares...

So?? This ensures the survival of the company. They run a business, and they will maximize profits. What is so incomprehensible about this to you??

What exactly make you so confident to believe that airlines would survive by cutting capacity? Given the size of the DL/NW combined fleet, could you imagine how much would cost to store a quarter or more of it ? And for how long?

And once stored how many of them would make it back from desert into service (incurring additional costs), and after that how much of the remaining stored fleet in the desert would worth as scrap?


User currently offlineBurkhard From Germany, joined Nov 2006, 4397 posts, RR: 2
Reply 21, posted (6 years 5 months 4 days 13 hours ago) and read 1828 times:

Since I'm aware this part is, like many posts in this thread, at the limit of what is allowed as "on topic", moderators please excuse. With an event of oil at $114 and two of the largest airlines of the world to merge, we cannot restrict the discussion here to single out the first DC9 to be grounded, and to speculate if the new Delta will purchase 787 or A350 or no aircraft at all.

Quoting FreequentFlier (Reply 10):
But yes, of course, US monetary policy is also to blame, and the Fed seems so busy cutting interest rates, it has completely forgotten about inflation and the US dollar.

I doubt it has forgotten, my understanding is it is wanted. Both wars the current president has started were financed by loans only. Wall street considers both as lost, that is when the free fall of the dollar started. To pay back these loans, inflation is needed, and that is what we see.

Whenever a war is financed by loans, it ends with inflation. This is the price the US has to pay. This inflation we see on higher gas price in the US, higher price for food, we see higher price for airline tickets arising, we hear the pilot unions want at least some compensation for the inflation, this is a classical economical scenario that was predicted years ago to have to happen - predicted before GWB was elected for the second time. US voters have decided to ignore these warnings in their majority.

So while we see the $114 currently, there is no reason whatsoever to believe that this isn't just another milestone on a way that will continue to rise. Remember - oil is almost stable in € or Pound Sterling, don't know about the Yen.

So what have mergers to offer?

First, some cost reductions on the administrative side. A larger airline can negotiate better prices. Many facilities can be utilized better. All this gives a cost reduction.
Flights can be replaced by less flights of larger aircraft. This brings a lot of cost reduction. Stuff can be used more efficiently - an argument that is stronger in smaller fusions than in such a large one.

Also, a merger has a risk, and this is management. Will the new management be set into position and action fast enough, which in this industry means days? Or will it take months of internal fights, a time in which complete market segments can be lost - there are enough examples in other industries of this.


User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 59
Reply 22, posted (6 years 5 months 4 days 7 hours ago) and read 1716 times:



Quoting MBJ2000 (Reply 19):

Quoting Jacobin777 (Reply 15):
Also, compared to places such as the United Kingdom, we still get gas for a much lower price.

It's €1.40/liter at the moment in Germany, that's about $8.50/gallon. Just for comparison...

..yup, we here in the States still get gasoline for quite cheap (comparatively speaking)..... yes ..

I think "pain" will start if we get to $5.00/gallon... yes 



"Up the Irons!"
User currently offlineLipeGIG From Brazil, joined May 2005, 11438 posts, RR: 58
Reply 23, posted (6 years 5 months 3 days 23 hours ago) and read 1583 times:
AIRLINERS.NET CREW
FORUM MODERATOR



Quoting Iloveboeing (Thread starter):
Oil has reached approximately $114.



Quoting Breaker1011 (Reply 7):
The point is that OPEC isn't responsible for what's happening to our price of oil. The continued absurdity of the US government's monetary policy is 100% responsible for where we are today

Agree 100%

Quoting Breaker1011 (Reply 13):
I agree with you. Everyone is demonizing the DL/NW merger for driving up fares and expunging capacity. Exactly what does everyone thing they should do instead??

Just Perfect ! No one can survive with fares like transcons for US$ 279 and 15-25 years-old fleet that spent a lot of oil. All airlines in the USA need to reduce their domestic offer as soon as possible and drive fares up at least 15%
It is bad for a consumer point of view, but will allow them to survive, to have an updated fleet and may be in the near future, with a better environment, they can introduce lower fares again. Also, important to notice that compared to other markets, the US fleet is of course stronger for domestic use, fly less than any major European or Asian profitable airline, and remain on ground during the night for up to 10 hours in general. More night flights (using more-fuel efficiency airlines like the 737NG and A319/A320), with higher fleet average use and more international flights also can help them.

They can select, do that and update their fleets, or just put the fleet on the deserts. The first option will allow to cut less jobs, IMO.

Felipe



New York + Rio de Janeiro = One of the best combinations !
User currently offlineVincewy From Taiwan, joined Oct 2005, 767 posts, RR: 1
Reply 24, posted (6 years 5 months 3 days 1 hour ago) and read 1472 times:

$115 today, I don't see this trend going away.

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