Mikey711MN
Topic Author
Posts: 1233
Joined: Fri Nov 07, 2003 4:19 am

NWA CEO Anderson: Gov't Help For Oil Prices

Thu Jul 08, 2004 2:25 am

From the Minneapolis Star-Tribune article, a few highlights:



In his July column in the airline's NWA WorldTraveler in-flight magazine, Anderson urged federal leaders to consider four strategies to reduce prices, including encouraging "our OPEC allies to increase production."

"We at Northwest Airlines believe that prices should typically be dictated by the market, and we believe that airlines, like other industries, must try to solve their own problems before turning to the government for help," Anderson wrote. "But fuel that costs $41 a barrel isn't just an ordinary market fluctuation, and it isn't just a problem affecting the airlines. It's a threat to the entire economy."

Poster's sidebar: doesn't running a large fleet of fuel-inefficient DC-9's contribute to a free market that substantiates $41 barrel costs??? Why yes it does...

Anderson said Northwest's fleet revitalization has helped the airline cope with high fuel prices because some of the new aircraft use as much as 50 percent less fuel than older jets. That's the case with twin-engine Boeing 757-300s, which have replaced DC-10-40s with three engines.



Anyway, while I like how NWA is operated and I subsequently think that Richard is doing a good job, he must know that government intervention in this case would benefit his airline far more than the others. Combined with their enthusiasm for the ATSB denial of loan guarentees to UA citing targeted subsidization, I've gotta believe that this would more or less be the exact same thing benefitting his airline. For example, how would TZ benefit much from this having aggressively revamped their fleet to save on fuel costs?

Somehow I don't see this going very far...

-Mike
I plan on living forever. So far, so good...
 
7e72004
Posts: 3440
Joined: Thu Apr 01, 2004 12:15 am

RE: NWA CEO Anderson: Gov't Help For Oil Prices

Thu Jul 08, 2004 2:28 am

I know some airlines, such as NW want help, but how far do they really want to go...before you know it it will start looking like "re-regulation."
The next generation of aircraft is just around the corner!
 
ssides
Posts: 3248
Joined: Fri Feb 09, 2001 12:57 am

RE: NWA CEO Anderson: Gov't Help For Oil Prices

Thu Jul 08, 2004 2:32 am

"But fuel that costs $41 a barrel isn't just an ordinary market fluctuation"

Then what is it? I didn't see him complaining when it was at the other extreme of $17 a barrel.

Just out of curiosity, what were the other three strategies he suggested? Putting pressure on OPEC is all well and good, but I am curious as to NW's view of the government's role in keeping prices down. If it involves significant market intervention, it should be shot down. Airlines like WN hedge their fuel; if NW had better cash management policies, they could probably do the same.
"Lose" is not spelled with two o's!!!!
 
slider
Posts: 6817
Joined: Wed Feb 25, 2004 11:42 pm

RE: NWA CEO Anderson: Gov't Help For Oil Prices

Thu Jul 08, 2004 2:32 am

Hey 7E7- the industry is already regulated to a very large degree as it stands now...

I'm not an advocate of govt relief for fuel, but Richard might get more traction if he started pounding on the fact that airlines are taxed to death...

On a $200 ticket, the carrier is typically forking over $50--25%--right off the top to taxes. That's insanity. When you factor in the costs of regulatory compliance, security (that carriers are eating a large portion of), and the rest, it's amazing any carrier can make money.

 
kdalaggie
Posts: 63
Joined: Thu Jul 01, 2004 1:10 pm

RE: NWA CEO Anderson: Gov't Help For Oil Prices

Thu Jul 08, 2004 3:21 am

Slider,
I agree with your statement, that the industry is highly regulated......but

you might run into a slippery slope if regulation were taken away (allowing any and all airlines a larger degree of competition) I'm not saying that's bad or good, but it sure will increase the amount of complaining from CEO's about helping anyone disadvantaged.

I don't think it too amazing that carriers are making money, all be it, that there is a lot of spotty profits from quarter to quarter with very very few airlines making money consistently.

Just my .02........
Gig'em Ags!!!!
 
isitsafenow
Posts: 3413
Joined: Sun Feb 01, 2004 9:22 am

RE: NWA CEO Anderson: Gov't Help For Oil Prices

Thu Jul 08, 2004 3:50 am

Hey MIKEY711MN...
Who said the DC 9 is fuel-inefficient? Do you thing tight-wad NW is flying airplanes that guzzle fuel? Everyone parked the 727 because of a three man cockpit and it kinda liked fuel. The 9 works with NW and that's why they still fly 164 of them today.
TZ is not making $$. New birds or not, they have problems a little deeper then most other carriers NOT in chapter 11.
TWA parked the three holer and went with MD 80's to save a few bucks. Where are they today?
What Anderson wants is what all airline CEO's want...Federal tax relieve and credits..one way is to remove ALL taxes on jet fuel. There are a host of others but do not expect Uncle Sam to step in and give the carriers a blank check to buy some kero. That's not gonna happen. Anderson is working another channel and he should. If you lose $$, why pay tax. Only in the USA do you lose $$ and pay tax...he says what all us business owners and CEO's say...No...that should not be.
safe
If two people agree on EVERYTHING, then one isn't necessary.
 
Mikey711MN
Topic Author
Posts: 1233
Joined: Fri Nov 07, 2003 4:19 am

RE: NWA CEO Anderson: Gov't Help For Oil Prices

Thu Jul 08, 2004 4:23 am

Q: Do you think tight-wad NW is flying airplanes that guzzle fuel?
A: Yes. 164 of them, according to you.

Without turning this into a DC-9 vs. 717 or NWA replacement thread or what have you, but a fact is a fact: DC-9's are relatively fuel inefficient than other newer aircraft. The respective business plans of airlines will weigh, in simplest terms for sake of this discussion, the cost of fuel versus the debt load of a newer fleet. NW went the route of maintaining older (read: comparatively fuel-inefficient) airplanes and others, TZ among them as you pointed out, went the route of buying new planes and saving on fuel.

My point is that NW in particular stands to gain from governmental intervention whereas other airlines with newer fleets do not. It would be like TZ or any new-fleet airline going to the government upon rising interest rates and asking them to intervene for the sake of "the economy at large". BS. They would likewise stand to gain disproportionately.

-Mike
I plan on living forever. So far, so good...
 
bigb
Posts: 746
Joined: Fri Nov 07, 2003 4:30 pm

RE: NWA CEO Anderson: Gov't Help For Oil Prices

Thu Jul 08, 2004 5:18 am

Isitsafenow

The main reason why the DC-9s are working for NWA is the fact that they are already paid for, therefore, everytime they fly the 9 series, they make money. The usually makes up for the DC-9s short comings on fuel vs. new jets.

Heres a break down for ya.

DC-9
Already paid for (no aircraft or lease payments)
Fuel inefficient vs a newer aircraft

vs. a newer aircarf (lets say A319)
Aircraft payments are needed
more fuel efficient vs. the DC-9

As you can see, operating the DC-9 does have its strengths against newer planes, but they also have their set backs. The way I look at it, you can go either way.
ETSN Baber, USN
 
SHUPirate1
Posts: 3428
Joined: Sat Sep 20, 2003 2:53 pm

RE: NWA CEO Anderson: Gov't Help For Oil Prices

Thu Jul 08, 2004 5:23 am

But Mr. Anderson, does that mean that the fuel that I buy for my car (which, mind you, is nearly twice as expensive as your fuel) should also be subsidized by the government? Either suck it up and deal with it, or buy some 717's and A-330's to replace some of your DeadCorpse's...
Burma's constitutional referendum options: A. Yes, B. Go to Insein Prison!
 
slider
Posts: 6817
Joined: Wed Feb 25, 2004 11:42 pm

RE: NWA CEO Anderson: Gov't Help For Oil Prices

Thu Jul 08, 2004 7:06 am

KDAL- Good point; just to clarify, I'm not advocating total unregulation. I think given the oligopolistic structure inherent in the business there would always be some regs, but it's the ones that are fundamentally an anchor around the airlines' heel that concern me.

Speaking of NW's D9 fleet, I recall Anderson saying that fuel would have to reach XXX amount per gallon before the D9s became unworkable from a fuel standpoint. However, I can't recall what threshhold he stated, so I'm at a loss to speculate whether they've reached it or not.
 
PSU.DTW.SCE
Posts: 6176
Joined: Mon Jan 28, 2002 11:45 am

RE: NWA CEO Anderson: Gov't Help For Oil Prices

Thu Jul 08, 2004 10:50 am

The DC-9's are not that inefficient from the standpoint they mostly fly short stage lengths. Since almost all -9 flights are under 1.5 hours, the fuel savings on such flights as compared to new equipment are not as significant as flying older equipment on trans-cons and international. The aquisition costs of new aircraft outweight fuel savings, at least in the case of the DC-9. With the DC-10-40 and 727's, the additional fuel and 3-person crew rendered the aircraft inefficient.
 
isitsafenow
Posts: 3413
Joined: Sun Feb 01, 2004 9:22 am

RE: NWA CEO Anderson: Gov't Help For Oil Prices

Thu Jul 08, 2004 9:34 pm

Safe sez thanks for the comebacks. I'm thinking that NORTHWEST AIRLINES does not think the DC9 is inefficient. Comparing the plane to say an RJ900, it just might be, but NW has nothing to compare it with. Closest in their fleet is the A319.
Mikey...Yes, there are 164 diesel 9's according to the June NW in-flight mag which every month list their fleet and number of birds... and I like your motto at the bottom of your posts....lol
safe
If two people agree on EVERYTHING, then one isn't necessary.
 
HlywdCatft
Posts: 5232
Joined: Mon Jan 29, 2001 6:21 am

RE: NWA CEO Anderson: Gov't Help For Oil Prices

Thu Jul 08, 2004 9:42 pm

I agree with Northwest but don't also.


Its the governments fault our oil prices are this high (I am not trying to start a political war here), so Northwest is going to the right place.

But...

If the government helps Northwest out, or lowers the oil cost for the airlines, do you think it will pass on to the ticket prices? No, I bet they will stay the same.

If the Government cuts the oil prices for the airlines, but not for the general public this could be a bad political move right before an election.
 
Mikey711MN
Topic Author
Posts: 1233
Joined: Fri Nov 07, 2003 4:19 am

RE: NWA CEO Anderson: Gov't Help For Oil Prices

Fri Jul 09, 2004 1:50 am

Its the governments fault our oil prices are this high

[Lumbergh voice]Mmm, yeah. I'm gonna have to sort of disagree with you here...yeah.[/Lumbergh] Seriously, it's only "their" fault as far as the policies set by them that faciliate a high and increasing demand against a steady or only modestly increasing supply of oil. So as long as we are responsible for electing said government, it is actually our fault!

But back on topic, it's not like the government is a distributor of oil to, for example, directly lower prices for a certain transportation sector. The only way that this could be done is if they cut whatever taxes applied specifically to airline fuel, which, as you mention, would likely cause a stir in political circles before November.

-Mike
I plan on living forever. So far, so good...

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