...and the hits keep on coming

Polar742

All the responsibility none of the authority
source: http://columbus.bizjournals.com/columbus/stories/2008/06/16/daily20.html?t=printable

Wednesday, June 18, 2008 - 5:01 PM EDT
Delta: Fuel delivers $4 billion hit; more route cuts planned


Business First of Columbus


The soaring price of jet fuel has cost Delta Air Lines Inc. $4 billion this year and the carrier now plans more cuts in domestic routes to balance out the expense gains.
The Atlanta-based airline said in a Securities and Exchange Commission on Wednesday that President Edward Bastian is expected to brief investors on steps the carrier will take to combat the crippling costs of soaring fuel prices and create a sustainable new business model. The plans include further cutting domestic capacity and boosting its international presence in a move to return to profitability.
Skyrocketing fuel prices have had a $4 billion impact on Delta (NYSE:DAL) with jet fuel prices in the second quarter averaging $3.18. That price is expected to rise to $3.63 in the second half of 2008.
Delta said it will trim its domestic capacity by 13 percent, beyond a 10 percent cut it projected in March. But the airline will boost international capacity by 14 percent. It also will move ahead with plans to remove airliners from its fleet this year. Delta has said it will mothball 15 to 20 big airliners and 60 to 70 regional jets.
Delta is Port Columbus International Airport's third-largest carrier, accounting for about 14 percent of the Central Ohio passenger market through April.
The completion of its merger with Eagan, Minn.-based Northwest Airlines (NYSE:NWA) also should help the airline become a stronger competitor while reducing cost, Delta said.
Delta's restructuring efforts since 2005 have helped the airline improve its revenue per available seat mile to 102 percent of the industry average in April, up from 86 percent three years ago. The company will continue to rely on its international routes to help it rebound, with foreign flight capacity expected to rise 15 percent to 20 percent this year.
The company recorded profit of $314 million on $13.4 billion in revenue last year, but swung to a $6.4 billion first-quarter loss.
Bad, bad news
 

Airdale

Well-Known Member
This is like the apocalypse of the Airline industry since her beginning. Unbelievable. A lot of us will be out of jobs.

I heard that the Airlines went to Congress to try and get some help. This was on the World news last night. Investors predict Airways and United will be gone by years end. I just wonder how bad it gets before something is done....by someone...anyone.
 

meyers9163

Well-Known Member
This is like the apocalypse of the Airline industry since her beginning. Unbelievable. A lot of us will be out of jobs.

I heard that the Airlines went to Congress to try and get some help. This was on the World news last night. Investors predict Airways and United will be gone by years end. I just wonder how bad it gets before something is done....by someone...anyone.
Did you have any link to that news about airlines going to congress? I'd be interested in reading up and seeing what they had to say. Hold on tight boys/girls! We'll need each other to make it through!
 

wheelsup

Well-Known Member
Either Parker or Kirby said they were meeting with Congress in DC on one of their town hall meetings. I heard it there.
 

cfii2007

New Member
This is like the apocalypse of the Airline industry since her beginning. Unbelievable. A lot of us will be out of jobs.

I heard that the Airlines went to Congress to try and get some help. This was on the World news last night. Investors predict Airways and United will be gone by years end. I just wonder how bad it gets before something is done....by someone...anyone.
Well they could raise fares, with 75% load factors, they might actually make money!!
 

pilot4500

IT Manager/ Former Cirrus Charter Pilot
Well they could raise fares, with 75% load factors, they might actually make money!!
I think it is a catch 22 situation. If they charge people what it actually costs to operate the flight, not too many people will be flying.
 

cfii2007

New Member
They will probably just cut capacity, whine about not making money with 80% load factors, merge, form monopolies and then raise fares to make money.
 

kellwolf

Piece of Trash
They will probably just cut capacity, whine about not making money with 80% load factors, merge, form monopolies and then raise fares to make money.
Like I said, raising fares isn't that simple. With an 80% load factor, sure you can raise fares.....but you're load factor isn't going to STAY 80%. You'll get spillage over to another carrier on your oversold flights, but your leisure travellers are gonna go with the guy who bucked the trend and DIDN'T raise fares.

Now, the problem the airlines are seeing is there's an economy crunch everywhere. The business traveler that used to fly to that important meeting is either conference calling it or making other arrangements. There simply isn't the budget to fly since costs have increased on all the other aspects of the business, like transportation of goods. Leisure travelers just aren't going anywhere. That trip they used to take to grandma's? Well, grandma's gonna get a card this year b/c the family's having trouble paying for gas and milk for daily stuff, much less a trip expenditure. Raising fares isn't going to solve that problem. If people are cutting out their trips now, raising fares isn't gonna to make people fly again.

So, if you raise fares, and your load factor drops off, you run the risk of a net gain of zero. Which means you may have raised fares, but your load factor dropped off to the point where you're still making the same income.
 

meyers9163

Well-Known Member
Blah blah blah, heard that one before. Guess what? All the mainline carriers are still here.
Seems to me in just my time over the 10 years I've been watching things, some majors have indeed gone under. One of the largest ones is TWA to me? Where'd they go? Yes American you could say but still they are gone. Airlines do indeed cease. Perhaps it wont be NWA/DAL/UAL/CAL/Airways but never know. I'd not be willing to say never.
 

fly8slep

New Member
This was on the World news last night. Investors predict Airways and United will be gone by years end. \.
Wow, that's a little bold I know for sure both are reducing the work force but I'm not sure about being gone. If this is true then half the regionals will be out of business.
 

pilot4500

IT Manager/ Former Cirrus Charter Pilot
I wouldn't rule out the possibility of them both being gone, but that does sound a little bit extreme that both will be gone by the end of the year. Only time will tell.
 

SoCalAprch

Well-Known Member
Yeah it would really suck if they were gone by year end. You know how many pilots that would be out on the street? I cant count that high...
 

Trip7

Well-Known Member
I don't think United will be gone way too much value with all their international routes in Asia etc. It just seems like they are way too big for the US gov't to let fall by the wayside. I would think they would merge before anything.
 

cfii2007

New Member
Like I said, raising fares isn't that simple. With an 80% load factor, sure you can raise fares.....but you're load factor isn't going to STAY 80%. You'll get spillage over to another carrier on your oversold flights, but your leisure travellers are gonna go with the guy who bucked the trend and DIDN'T raise fares.

Now, the problem the airlines are seeing is there's an economy crunch everywhere. The business traveler that used to fly to that important meeting is either conference calling it or making other arrangements. There simply isn't the budget to fly since costs have increased on all the other aspects of the business, like transportation of goods. Leisure travelers just aren't going anywhere. That trip they used to take to grandma's? Well, grandma's gonna get a card this year b/c the family's having trouble paying for gas and milk for daily stuff, much less a trip expenditure. Raising fares isn't going to solve that problem. If people are cutting out their trips now, raising fares isn't gonna to make people fly again.

So, if you raise fares, and your load factor drops off, you run the risk of a net gain of zero. Which means you may have raised fares, but your load factor dropped off to the point where you're still making the same income.
Spillage to what airlines?? There have been quite a few that have folded...and with practically everybody running high loads.....not everyone is going to run and fly Southwest.
 

SoCalAprch

Well-Known Member
Spillage to what airlines?? There have been quite a few that have folded...and with practically everybody running high loads.....not everyone is going to run and fly Southwest.
I don't know about spillage but people aren't going to pay what it costs to operate a profitable flight with the fuel and economy combo currently.

Theoretically lets say they need an 80% load factor at 500 bucks a trip to be profitable from A to B. Right now they are charging 400 bucks and have 85% load factors and are losing money. They up it to 500 bucks and now you have a 70% load factor and you are once again in the red. You drop it to 450 and have 80% but are still losing money. You following... Its pretty basic economics with supply and demand. Currently with the economy and fuel prices they can't find that happy median to keep them profitable. They charge too much and people don't fly, too little and it won't make you money. You can charge 1000 bucks to go from ORD - LAS all day but if you have 3 dudes flying it ain't gonna make you no coin. If I have any faith left in this industry it is that I believe that there are smart people working on this that know a little more than us arm chair CEOs. I think its funny that everyone thinks that no one in the whole industry has thought that maybe they should raise prices. Maybe people should write a letter to the CEOs of all the big guys and then they will realize what their top paid executives are missing. The only way to make money right now would be govt. subsidies and/or some form of regulation. My two cents...
 
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