WSJ: Airlines, Battered By Losses, Look Set for Rebound

[question everything]

Airlines, Battered By Losses, Look Set for Rebound

Falling Costs, Fewer Seats May Be Ticket to Recovery For Some Major Carriers
By SUSAN CAREY and MELANIE TROTTMAN
Staff Reporters of THE WALL STREET JOURNAL
November 26, 2005; Page A1

After five years of steep losses, the U.S. airline industry appears to be on the verge of a recovery, as fuel prices come off their peaks, labor costs decline and excess capacity finally begins to shrink. Strong demand for travel also is adding to the industry's tailwind. The Air Transport Association says passenger traffic this year looks likely to exceed 2004's record, which surpassed the previous peak set in 2000. During the busy Thanksgiving travel period, from Nov. 19 through Nov. 29, the trade group expects the nation's airlines to carry 21.7 million passengers, topping the year-earlier high of 21.6 million.

Several large airline operators, including Continental Airlines, Alaska Air Group Inc. and the newly merged US Airways Group Inc., are expected to be in the black for all of next year, compared with just three carriers this year, according to mean estimates of analysts surveyed by Thomson Financial. Among the discounters, which now control pricing on major routes, perennially profitable Southwest Airlines forecasts a 15% jump in profits for 2006. JetBlue Airways, which is projecting an unusual loss for 2005, is expected to return to profit in 2006, according to analysts. Meanwhile, seven airline stocks are trading near their 52-week highs.

(snip)

On Monday, Secretary of Transportation Norman Mineta visited Chicago's O'Hare International Airport to announce funding details for a $15 billion expansion that will bring a new terminal and two new runways. "O'Hare must expand to keep pace with the growing demand for air travel," Mr. Mineta said.

It still could be too early to celebrate. The airlines' heavy debt burden, their capital-intensive nature and their sensitivity to the ups and downs of the economy leave them vulnerable to such risks as a new terrorist attack on the U.S., a sudden economic slowdown, a global pandemic or another surge in fuel prices. Moreover, without "huge labor-cost adjustments," the older hub-and-spoke carriers that date from before the days of deregulation, could still have massive problems, says Severin Borenstein, a University of California at Berkeley economist who studies the industry. The nascent turnaround is likely to bypass some carriers, at least for now.

(snip)

Write to Susan Carey at [e-mail] and Melanie Trottman at [e-mail]

URL for this article:
http://online.wsj.com/article/SB113296298246606932.html (subscription)

[mbperrin]

1. Boy, just what I wanta do!

Fly six miles up with a budget-maintained plane staffed by poorly paid employees run by bastards who are just looking for any way to squeeze another bonus from the stockholders...

No thanks...haven't flown since Raygun fired the controllers.

Not gonna do so any more.

[bemildred]

2. Second that. nt

[Psephos]

4. The stats say you're waaaay safer in the air than on the road

Average deaths per year from riding automobiles: 41,616
Average deaths per year from riding motorcycles: 2,222
Average deaths per year from riding passenger trains: 1,096
Average deaths per year from riding bicycles: 795
Average deaths per year from riding commercial air carriers: 169

These are U.S. five-year accidental death averages computed over 1994-1998.

http://hazmat.dot.gov/riskmgmt/riskcompare.htm

Peace


edit: added time period

[mbperrin]

18. Yep, before the changes going on now occurred, and...

I'm alive and those thousands you've listed aren't. Right?

Peace indeed, but please don't pick my tax pocket for something I neither want nor use.

[Psephos]

20. Hilarious response

"I'm alive and those thousands you've listed aren't. Right?"

Wrong. I didn't list any dead people. Just showed some comparative risks. Next.

Just off the top of my head, I neither want nor use Social Security retirement benefits, robot missions to Mars, Coast Guard patrols in Alaska, spent nuclear fuel rod storage, inspection of the Gulf shrimp industry, Head Start pre-school programs, and price supports for walnut and almond farming in the Central Valley.

So please don't pick my tax pocket for any of those. Cuz I'm a country of one. The only tax anyone should pay is the tax that is used to write a check directly back to them; it's all me me me and what I want.

Heh.

[question everything]

9. Can't canoe to Ireland, or to Holland (nt)

[Daphne08]

10. Yes, I remember that well. It was the Death Knell for unions.

:mad: I'm still furious about that one!

[rfkrfk]

3. tax on jet fuel is four cents a gallon

for international flight, tax is zero

[daleo]

5. Dumping pension obligations might have helped too. n/t

[bemildred]

6. La la la la ,,,, Yes, it will all be fine now. nt

[Porcupine]

7. What do they smoke at the at the WSJ anyway?

Airlines with high fuel prices and higher fuels prices expected as the impacts of peak oil accumulate. How is a public expected to pay higher prices for everything else going to afford higher travel costs? Say goodbye to the airline industry.

They told us to buy Enron too.

[Nomen Tuum]

11. What do they smoke at the Wall Street Pravda?

Hey, they're on fairy dust. They live in their Ayn Rand/Milton Friedman Lasseiz Fairyland where the Invisible Hand gives you whatever your little heart desires and everything is wonderful...

[pitohui]

14. public demand 4 limited number of airline seats actually at all-time high

airliners are packed to capacity, if you're not willing to pay the price, others will

it was unrealistic to expect airlines to go on forever losing $$$ on every ticket sold, it just makes more sense to sell fewer higher priced tickets for a small profit than to sell lots and lots of cheap tickets at a loss

delta is bankrupt not just because of katrina but because they were losing $23 on every ticket sold and thinking to make it up in volume, what the hell kind of dumb-ass business model was that?

no one is telling you to buy an airline ticket, frankly, more bargain shoppers are not what is wanted in the travel industry, what's wanted are more business travelers and higher end travelers who are not price sensitive

[0007]

8. How come the airlines are always getting bailed out?

Has any one heard of a Union that is going under getting bailed out?

[pitohui]

16. because you can't have a first world economy w.out reliable air travel

there are sound business reasons why air travel should be subsidized if it is not possible for it to be profitable, which may well be the case

there are other countries who have nationalized their airlines, i don't see us openly going that route, but bail-outs are prob. always going to be a reality of this cyclic industry

we have a large nation, w.out the ability to travel at reasonable price, we are going to have serious issues w. business, w. family, and ultimately you could even imagine a scenario where the country was balkanized if air travel really only existed for the very rich, which is what you would have in a scenario where cheap air travel for the masses is not supported by the society

[0007]

17. I've heard the same arguments by rich CEO's for the airlines that

would screw the workers on their pension fund in a New York second with this type of rhetoric in order to maintain their standards.

I see no compromise by anyone.

[pitohui]

19. i'm not a rich ceo

i would support nationalizing the airlines and taking the profiteers out of it, since the only people profiting now are a very few so-called key employees such as ceo's and cfo's, not even the stockholders make any money under this system since they lose everything every time bankruptcy is declared

so the current "for profit" system stinks for everyone, shareholder, passenger, employee

i'm not afraid of the word "socialize," i just don't think it will happen, we'll continue to have stealth socialization and welfare for the airlines and other crucial industries because of the reality that the ceo of an airline can buy politicians and you and i can't so the ceo is not going to be removed from the process by peaceful political working-thru-the-system

[0007]

22. It seems to me that the bailouts are very selective. The auto

industry doesn't appear to be getting much help.

[question everything]

23. The question should be: why subsidized airlines and not trains?

Yes, I agree that we need reliable air service both domestic and international. But we should also have reliable train and bus service and, yes, all should be subsidized but in turn we should demand fair wages for employees and caps on the goodies for top officers.

[aztc]

12. The key reason:

Strong demand for travel also is adding to the industry's tailwind.

In other words, it is consumer demand that drives the industry (and the politicians who subsidize it).

Try the New Athena National Passenger Rail System (NANPRS) instead!

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=115x35508

[DemoTex]

13. But how long can Delta and United sustain $10-15M/day loses?

Delta is in particularly bad trouble, having run up some of the highest loses in airline history in the past year or so. At one point in 2004, when oil was still < $50/bbl, Delta was losing over a million dollars an hour, every hour, 24/7, for an entire financial quarter. Not even bankruptcy can help that kind of hemorrhaging.

Delta, United, and Northwest are going to have to look at merger alternatives. The America West-US Airways merger, with strong outside financing (especially from Airbus), might just be the model for the industry. The others would be lucky to be as compatible for a merger as AmWest and USAir were (they had very little route overlap).

Time will tell. But, for some airlines, there is not much time.

[pitohui]

15. delta and united operating under bankruptcy

if you didn't have to pay yr bills, i expect you'd end up doing pretty well financially long term in yr business too, just look at donald trump, he declares bankruptcy as a matter of routine and thus is able to live the lifestyle of a billionaire -- if you really spectacularly lose your investor's money, you just have a way of failing upward because too many other people are invested in yr success

united will survive this just fine, delta is perhaps another story, their stupid mis-management has destroyed a once fine airline and it may be open to question whether gov't assistance and bankruptcy protection can save them

[goforit]

21. Here we go again...more bail outs via our pockets.