Fuel Question

[Peterpan]

Delta announced today it will lose another 1 Billion dollars in 2005

Most of the US Airlines are losing money due to higher fuel cost's

In Europe, airlines are making money and the fuel is 3 times more expensive.

I don't get it.

Is it some new type of math the US airlines are using or have they
become bloated Politically Correct business model disasters due to PC
hiring practices and employee perks?

Or are they looking for a tax payer bailout for their inefficient
business operations?

Just curious

[George Patterson]

Peterpan wrote:
>
> I don't get it.
>
> Is it some new type of math the US airlines are using or have they
> become bloated Politically Correct business model disasters due to PC
> hiring practices and employee perks?

Nobody knows. If they did, Delta would take the steps needed to get out of the
red.

George Patterson
Drink up, Socrates -- it's all-natural.

[Colin W Kingsbury]

"Peterpan" > wrote in message
.. .
> Delta announced today it will lose another 1 Billion dollars in 2005
>
> Most of the US Airlines are losing money due to higher fuel cost's
>
> In Europe, airlines are making money and the fuel is 3 times more
expensive.

The airlines don't pay pump prices; something like $1/gal is what they pay
now, last I heard. I kind of doubt the European airlines are paying
$3-4/gal.

> Is it some new type of math the US airlines are using or have they
> become bloated Politically Correct business model disasters due to PC
> hiring practices and employee perks?

The best analyses of the airline industry that I've read have concluded that
it is questionable whether the industry as a whole has ever generated a
profit for a sustained period of time. This includes the "good old days"
pre-deregulation. The capital costs are enormous, the operating expenses are
shocking (10s of millions a *day* for a big airline), and margins utterly
unpredictable.

The problem today is that there are now enough low-cost competitors to deny
the majors real pricing power on enarly any flight other than international
routes. Wherever, whenever you want to go, there is a cheap ticket
available. Since the airlines eat the cost of flying the plane no matter how
few seats they sell, they are better off selling seats at a loss and getting
something. Their inventory is as perishable as sushi.

> Or are they looking for a tax payer bailout for their inefficient
> business operations?

Always. Of course, an affordable air travel system is as much of an economic
necessity as the highways, so the only question becomes whether the airlines
are using the money they're given in the most efficient way possible. Top
airline executives being paid millions while their companies hemmorhage
money and they gripe about 56-year-old pilots making $270k do not set a good
example.

One also needs to consider that aircraft loans and leases occupy an
important part of the financial landscape. Right now, if an airline like
United were to go Chapter 7, there would be a major write-down on the value
of an awful lot of its fleet. Back in 2002 when most of the gov't loans were
made it was worse still. The collapse of one could trigger a cascade of
write-downs, with companies like GE Capital in danger of being completely
wiped out. Because of the way markets are leveraged these days, such a
collapse could threaten all kinds of commercial credit, and even home
mortgages. The expression "too big to fail" comes to mind. There is a lot of
moral hazard when you make clear that you won't allow something to go
completely bust- look at Amtrak for an example- but hard crashes in the
wrong places at the wrong times can also cause very serious trouble.

IMHO, 2005 is a long way from 2002, and we can afford a little bloodshed.

> Just curious

Also, keep in mind that many if not most major international airlines are in
fact flag carriers that are heavily subsidized and/or given favorable
economic treatment in their home countries. Also, international travel has
been less affected by the low-cost carriers, and if you look at their
balance sheets, European (and Asian) airlines make most of their money on
non-domestic travel, often long-haul. EasyJet and Ryanair are relatively
newer presences in the EU travel market than Southwest & co. are over here.
Also, there have been some extinctions in the EU recently, c.f. Swissair and
Sabena.

-cwk.

[Robert M. Gary]

Europe and the U.S. operate in different competitive environments. It's
hard to compare the two. It's very hard to raise prices in the U.S.
because of the deep discount carriers. Its like Wal-Mart and the old
hardware store. Jet Blue and Southwest Airlines have reinvented the
market, and the old timers are having to come up to speed or die. It's
a classic example of how good free market works. The old, less
efficient companies have to change or go out of business. Meanwhile,
Southwest Airlines continue to make money, while others complain its
not possible. A big win for innovation.
I can fly from Sacramento, clear across the country to New York for
$99. I can't fly from Italy to Germany for anything near that. If the
socialist gov'ts of the EU allow it, discount carriers will soon take
over the EU too and people will find its cheaper to fly than take the
train. We're already starting to see that happen in Asia.

-Robert, MBA

[Blueskies]

"Peterpan" > wrote in message .. .
> Delta announced today it will lose another 1 Billion dollars in 2005
>
> Most of the US Airlines are losing money due to higher fuel cost's
>
> In Europe, airlines are making money and the fuel is 3 times more expensive.
>
> I don't get it.
>
> Is it some new type of math the US airlines are using or have they become bloated Politically Correct business model
> disasters due to PC hiring practices and employee perks?
>
> Or are they looking for a tax payer bailout for their inefficient business operations?
>
> Just curious

Autogas is more expensive because the European governments add a tax to it; I'm sure JP is pretty much the same 'price'
worldwide...

[Colin W Kingsbury]

"Robert M. Gary" > wrote in message
oups.com...

> I can fly from Sacramento, clear across the country to New York for
> $99. I can't fly from Italy to Germany for anything near that. If the
> socialist gov'ts of the EU allow it, discount carriers will soon take
> over the EU too and people will find its cheaper to fly than take the
> train. We're already starting to see that happen in Asia.

This was very true five years ago but not really any longer. EasyJet and
Ryanair have opened this door wide enough that it won't be getting slammed
shut again soon.

-cwk.