CanadaEH
Topic Author
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Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 4:07 am

Which airline is next?
Fuel crisis could be the beginning of end of one or more of the nation's major carriers: experts.


NEW YORK (CNN/Money) - With new threats of bankruptcies, and appeals for labor concessions and government assistance, the nation's major airlines are facing a crisis that may well spell the end for one or more carrier in the next few years, according to industry executives and experts.

Airlines have traditionally taken a long time to die -- Trans World Airlines lost money for decades before its final bankruptcy filing and acquisition. But experts say the carriers operating a big network of hubs and international flights -- the so-called legacy or major carriers -- face new challenges that could speed up their demise.


More at:
http://money.cnn.com/2004/05/25/news/fortune500/airlines_outlook/index.htm?cnn=yes
EH.
 
GSPSPOT
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RE: Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 4:22 am

I don't think this is the nail in anyone's coffin (except possibly US). Airlines can raise prices or add surcharges as needed to cover rising costs. Everyone knows what's going on. Every company I can think of has added some kind of surcharge or way to recover costs. I think it would take another catastrophe that would keep large numbers of pax on the ground to do another carrier in....
Finally made it to an airline mecca!
 
wdleiser
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RE: Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 4:25 am

I have been wondering how America West has been doing. I have not heard about them in ages and I have always wondered how they made money.
 
AA737-823
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RE: Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 4:44 am

Yeah, I think that when you consider ALL the strikes against carriers, at least one big name won't survive. United or US will go first. Labor, fuel, and all the other costs will surely push someone under, and the rest will survive only because of that one carrier's loss.

That's my prediction.
R
 
nosedive
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RE: Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 4:52 am

Yesterday's Denver Post seemed to believe that rising fuel prices could cost UA some loans.
http://www.denverpost.com/Stories/0,1413,36~33~2169523,00.html
 
freshlove1
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RE: Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 5:05 am

Nice to see that we have had the token "US is dead" post concerning this topic. When are people going to learn that no airline is safe. US is doing better then DL and UA right now, but I see that most have not bothered to see this. Oh this just in the price of peeled carrots has just gone up, I guess this means that US is finished...Come on people get real!!!!!
 
GSPSPOT
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RE: Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 5:08 am

Please understand, that I'm rooting for US's continued survival. It's the main carrier at GSP, and I'd hate to see that void. Plus, I have more US FF miles than any others. Even if other carriers added flights, I bet we still wouldn't have flights to as many cities nonstop.
Finally made it to an airline mecca!
 
freshlove1
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RE: Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 5:11 am

Maybe when US starts their point to point thing GSP might have a few more cities added instead of always having to go through PHL, PIT or CLT to get where you need to go unless of course that is where you need to go.
 
GSPSPOT
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Joined: Thu Sep 11, 2003 1:44 am

RE: Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 5:30 am

We do have several daily US flts to LGA and DCA at least. My partner flies US all the time, and says the planes are always full in/out of GSP, and sometimes he can't even get on flights he wants because they're sold out. I really wish US would add some mainline flights back. I mean, if PNS can support them, come on!!
Finally made it to an airline mecca!
 
OPNLguy
Posts: 11191
Joined: Tue Jun 15, 1999 11:29 am

RE: Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 5:55 am

>>>Which airline is next?
>>>Fuel crisis could be the beginning of end of one or more of the nation's major carriers: experts.

The above deals with a major issue on the "cost" side of the equation, but another issue is on the "revenue" side.

With today's stories out re: the possibility/probability of a major terrorist attack this summer/fall, should something like that occur (irrespective of whether it directly involves aviation as a mechanism or not), overall travel demand will likely go in the toilet, taking revenue streams along with it.

A possible "double-whammy" here is that any attack would also probably increase oil prices even higher than current levels, exacerbating the problems for financially weaker airlines who haven't been a financial position to hedge fuel.

Between the potentials for even higher costs and suddenly lower revenues, this could be one UGLY summer...for people...for the industry...

Pray (to the Deity of your choice) for world peace...!




ALL views, opinions expressed are mine ONLY and are NOT representative of those shared by Southwest Airlines Co.
 
ChiGB1973
Posts: 1394
Joined: Mon Mar 22, 2004 6:39 am

RE: Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 6:02 am

I don't know why it is just the legacy carriers. Without the fuel hedge Southwest has in place, they would have posted a loss for the first quarter of this year.

http://www.usatoday.com/travel/news/2004-05-07-swa-oil_x.htm?POE=TRVISVA

It is hurting everyone.

M
 
ultrapig
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RE: Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 6:07 am

OPNL-Thank you for your generic request for prayer-Let me add-to those atheists on the Board let's hope the the forces of chance play into the hands of the legacy carriers.
 
freshlove1
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Joined: Thu Jan 15, 2004 1:38 pm

RE: Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 11:34 am

So what is WN going to do after 2 years when the $24 dollar a barrel oil runs out??
 
OPNLguy
Posts: 11191
Joined: Tue Jun 15, 1999 11:29 am

RE: Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 12:18 pm

>>>So what is WN going to do after 2 years when the $24 dollar a barrel oil runs out??

I don't know this for a fact but I would presume at least some hedging has been accomplished for future years, but what percentage and at what cost I couldn't tell you.

ALL views, opinions expressed are mine ONLY and are NOT representative of those shared by Southwest Airlines Co.
 
ckfred
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Joined: Wed Apr 25, 2001 12:50 pm

RE: Fuel Prices May Be Final Straw For Legacy Carriers

Thu May 27, 2004 1:20 pm

The dire predictions for the airlines is based on the price of oil staying above $40 a barrel. If Saudi Arabia does increase its production to the levels that it is promising, that should cause oil prices to start declining, although not until Q3 or Q4.

If other OPEC countries increase production, or if China's economy starts to overheat, leading towards inflation and a economic slowdown, that should also cause prices to fall.

But, if gas is still over $2 a gallon come Christmas, then it's a whole other story.

But I have two questions. First, why don't the LCCs raise fair? I understand that some have hedged, but they still have to be affected to some degree by oil prices. If the legacy carriers want to add $5 to $10 per segement, I would be inclined to add $2.50 to $5 per segment. After all, that's only the cost of 2 gallons of 87 octane.

Second, how are the European carriers coping? I assume that jet fuel in Europe is more expensive than in the U.S., because of European taxes. But have European carriers seen the price of jet fuel run up to the degree they have here, and are the former state carriers having the same pricing problems that U.S. legacy carriers have?