Posted on 06/11/2009 4:01:12 PM PDT by FromLori
All of the fuel-hedging, layoffs, capacity and route-cutting the airline industry did last year in an attempt to offset the rising price of fuel has gone for nothing. Delta (DAL) announced today that it would need to make more significant reductions in available seats and the process would cost many more people their jobs.
According to the AP, most of the $6 billion benefit that Delta got from its NWA merger and resulting capacity reductions will be washed away by falling revenue due to the global recession. Delta will chop its number of international seats by 15%.
The news is bad for Delta, but almost certainly worse for many of its competitors that did not pick up the economies of scale that Delta did by its takeover of Northwest.
Rising oil prices and falling passenger loads have started to hit the airline stocks over the last month. Delta’s shares are flat, but its peers, many of them with weaker balance sheets, have not been so fortunate. Shares in US Air (LCC) and Continental (CAL) are down more than 20%. United’s (UAUA) stock is off 17% and American’s (AMR) 12%.
The recession is likely to persist long enough that, coupled with the potential that oil could stay at or above $70 for the rest of the year, airlines might be back in the merger business. The success of the marriages is often debated. Mergers bring down labor costs but often at the expense of employee unrest and strikes. Merging reservation systems can take over a year and the process usually undermines customers service and sometimes serves as a catalyst for fliers to move to other carriers.
Otherwise, everything in the airline industry is fine.
wonder who specifically is speculating the price of oil up?
You know I read one of the banks GS I believe rented tankers to store oil so besides them who knows but it is being hoarded I know that.
It sounds like the airline industry is ripe for BO to nationalize.
http://www.businessinsider.com/hey-guys-the-iea-still-thinks-oil-demand-will-be-way-down-2009-6
See also IEA admits speculation is driving up prices
Barry will buy them then he will have planes,trains,automobiles.
My bad and tobacco,banks,health care on and on and on.
While most of the rest of the airlines have reduced prices in an attempt to increase the number of passengers, Delta has done the opposite. Every time I have booked a flight in the last 4.5 years Delta has been at least 150% and usually tow to three times higher than other airlines for the same destination.
I am a medallion level flyer with Delta, but can no longer afford to fly with them.
Same as before. The Democrats in Congress. They canceled all the leases that were signed after Bush removed the Executive Order against drilling.
Differing prices between airlines for the same origin/destination/dates are usually caused by availability issues, not structural fare differences. It may well mean that Delta is filling up before the other airlines.
Welcome to the world of American business as administered from Kremlin-on-the-Potomac.
Then my timing is definitely off.
George Soro’s is responsible
Speculation isn’t driving the price of oil. The weakening U.S. dollar is causing the price of oil to rise.
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