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Oil Prices Cause US Airlines $1B In Losses

From a remarkably unconcerned Associated Press:

Biggest US airlines have combined 1Q loss over $1B

By Joshua Freed And David Koenig, AP Airlines Writers [sic] Tue Apr 26, 2011

With fresh red ink at Delta and US Airways, the five biggest U.S. airlines showed a combined loss of more than $1 billion for the first quarter. Soaring jet fuel prices are the big culprit.

The total loss was only about $100 million larger than a year ago, even though jet fuel spending jumped by 28 percent, nearly $1.9 billion. Airlines were able to narrow the difference in fuel spending with a 12 percent increase in revenue.

Translation: everything is okay because the airlines were able to pass on the increased cost of fuel by jacking up their ticket prices by 12 percent.

They have raised fares seven times since the start of the year and would like to keep doing that to offset higher fuel costs

Delta Air Lines Inc., which reported a $318 million loss on Tuesday, said fare increases covered 70 percent of the run-up in fuel costs for the first quarter.

US Airways Group Inc. lost $114 million in the quarter. On Tuesday, it announced new reductions to its flying schedule in the second half of the year, which should cut costs and perhaps drive up fares

"Perhaps"? By the way, just imagine what this is doing for the economy in general.

Between them, the five airlines lost $1.08 billion in the first three months of this year… Fuel spending jumped to $8.45 billion from $6.60 billion a year earlier…

With fuel costing more than $3 a gallon — spot prices are up about 50 percent since September — airlines are culling flights that don’t produce enough revenue…

Lest we forget, US airlines are a particular target for Muslim terrorists and others around the world because they symbolize the wealth and freedom of America that they despise and fear.

And speaking of hatred, these airlines are some of the country’s biggest ‘oil speculators.’ They have to try to lock in the price of oil for their future needs, in order to stay in business.

But to Mr. Obama, of course, they are simply criminals.

This article was posted by Steve Gilbert on Wednesday, April 27th, 2011. Comments are currently closed.

6 Responses to “Oil Prices Cause US Airlines $1B In Losses”

  1. Right of the People

    “Damned money-grubbing capitalist bastards,” Obie said around the Kool stuck in the corner of his mouth.

  2. Rusty Shackleford

    Sorry, but revenues have to be made up in other ways. Airlines are specifically denied charging extra because fuel prices go up. It’s part of the deregulation act of 1978. Thank you again, Mr Carter. It’s what has kept ticket prices at an unbelievable low level since then when, instead of allowing the industry a free market place, the democrats installed binding legislation to hurt the business overall.

    There are no more “low cost carriers” because EVERY airline in the US has adopted Southwest’s business model. But when fuel prices go suborbital, ticket prices cannot go up to cover the lost revenue. In other words, the airlines have to eat it and lose money.

    For those who think that airlines make a lot of money, they do. But they have to spend a lot of money just to do business. Fuel costs are A, #1 the highest cost we have. It can be hedged by advance purchase of fuel contracts at an advanced rate. So that when fuel costs go up, like they do, the supplier still has to sell at the guaranteed amount. But these contracts have limits.

    Next is employee salaries. Employees in airlines are almost all specialists. Pilots, flight attendants, technicians, etc. Everyone does a specific job and the training in those jobs is ongoing. It ain’t cheap. But it’s not even close to what it was in 2001, before 9/11. Every airline took it in the shorts in a big way. This is why instead of flying at 55% capacity, they fly at 80%+ capacity. That means full planes, all the time. No more half-empty redeyes. Nope. Can’t afford to do that anymore. It’s wasteful.

    So…I always wondered how this administration was going to try to nationalize air travel and now I know. Make it so cost-heavy that government subsidies will be necessary. Just like British Airways, Lufthansa, KLM, and all other major airlines worldwide. They cannot operate without tax money. It’s just a matter of time before United, Delta, US Airways, American all clamor to DC to beg for help.

    Ticket prices have been ridiculously low for decades which is a favorite topic for me when I hear another passenger whine about paying $199 to fly from JFK to LAX. They should be paying over $500 one way. Add to that, the TSA, the lax dress codes and the losers who are just expecting the airline to get them away from their parole officer….you have air travel, 21st century style. Yay.

    Then, add to that…the MBM categorizing airline pilots as alcoholics and “cowboys”, you have the perfect storm. The government and the media have done much to destroy what once was an excellent industry to work in. But, in keeping with the realignment of everything else, it’s time to take any fun out of it, let alone any chance to make any money.

  3. Petronius

    April economic update :

    • AP forgot to mention that American Airlines lost $436M in the first quarter due to the increased cost for jet fuel.

    • In March, the Federal deficit grew by $188 billion.

    • The US public debt grew to over $14.3 trillion. Each month the regime is setting new records for debt, spending, redistributions, money creation, regulations, wars, gas and food prices, and declines in the dollar. The country is being sucked into an endless downward spiral.

    • Unemployment is growing worse as the number of jobs declines and immigration continues unchecked. Official unemployment is 13.4M while actual unemployment is 23.9M. Over the last decade the US has lost 42,400 factories and 32% of its manufacturing jobs. About 59% of the US population now receives government handouts of one sort or another, and government welfare and entitlement payments exceed tax receipts. The American dollar is tanking. The government is buried in debt. The leftists in command of the Federal government are busy making matters worse, preaching class warfare, dividing the country, spending money we don’t have, and passing laws and regulations that punish businesses and economic activity. Cui bono?

    • Official unemployment rate was adjusted slightly from 8.9% to 8.8%. However, this announcement was quickly followed by an “unexpected” increase in weekly jobless claims.

    • The percentage of Americans holding a job fell to 45.4%, a 30-year low. Only 66.8% of American men have a job, the lowest level in American history. According to the BLS, the average length of unemployment is at an all-time record high of 39 weeks.

    • On 18 April, S&P downgraded US public debt from stable to negative, and threatened to reduce America’s AAA rating if action is not taken within two years.

    • The S&P’s announcement must be taken as a signal that interest rates are going to increase. Increased rates will be necessary in order to place new US debt. Currently one in every four dollars borrowed by the US government goes for interest on the national debt.

    • Bond vigilantes may force the Liberals finally to balance the Federal budget. The US cannot afford higher interest rates. The Fed cannot monetize the debt forever without the US dollar falling apart. The only other option is default.

    • Bill Gross’ PIMCO bond fund (the world’s biggest bond fund) is now shorting US government bonds.

    • On 7 April, the 30-year rate jumped to 4.62%, moving above the trend line and indicating higher interest rates lie ahead. More recently the rate has retreated, but the long-term trend remains up. Interest rates are going to go much higher, and they are going to stay high for a very long time.

    • Several regional Feds have advanced the idea of raising interest rates this year.

    • With higher interest rates and restricted access to debt, Federal and State governments will be required to adopt austerity, abandoning many social services they once provided.

    • On 26-27 March, 250,000 moochers and looters led by Labour’s Ed Miliband turned out in London to demonstrate against British austerity cuts. So-called anarchists attacked businesses, banks, hotels, shopping areas, and police. Street fighting raged late into the night.

    • Of course they will have to raise the debt ceiling. Otherwise they have to cut spending by one-third and balance the budget immediately. Congress simply does not have that kind of political courage.

    • Over the past 6 months the US dollar has been the worst performing currency on the world stage.

    • Sarkozy called for a move away from the US dollar as the world’s reserve currency. This is the first time such a move has been proposed by a world leader. The US did not respond.

    • Investment guru James Grant recommended a return to the gold standard. He warned of the possibility of an unexpected inflation shock that could drive interest rates and tumble markets.

    • Small business confidence declined in March.

    • The economy slowed again during March and April. GDP data show that US economic growth fell in the 1st quarter to 2% annualized rate. As a result, unemployment is expected to get worse.

    • Housing, construction, and auto sales continue to slide. There was a further decline in housing prices and consumer confidence.

    • Workers’ wages remain flat while prices of everything they buy are going up.

    • Oil climbed to $113 bbl.

    • Refiners are being hit by increased petroleum prices. This means even higher prices will soon be arriving at the pumps. Halliburton and Schlumberger warned of reduced earnings due to MidEast turmoil.

    • We used to feed the world but now we import some of our own food. Inflation has hit food, energy, and commodities. And it’s only going to get worse.

    • The US dollar fell 16 percent against foreign currencies over the past year and hit a 3-year low on 22 Apr. The dollar is probably overdue for a correction, but in the meantime new lows are being set almost daily and the mega trend for the dollar is down.

    • The US dollar is falling markedly lower against all major foreign currencies. Hedge fund manager Dennis Gartman says “panic dollar selling is setting in.”

    • Ghost towns are beginning to appear across the country; Detroit is becoming the country’s first “ghost city.”

    • There has been a collapse of law and order on America’s southwest border. There is a nationwide surge in random acts of violence.

    • On 31 March, WalMart CEO Bill Simon warned inflation is “going to be serious” and “We’re seeing cost increases starting to come through at a pretty rapid rate.” Hershey raised prices across the board. Many grocery companies have been absorbing higher costs, but cannot hold out much longer.

    • In March, US prices rose 6.5% on an annualized basis.

    • CRB Index commodities year-over-year comparisons (March) : foodstuffs up 43%, copper up 20%, raw industrials up 23%.

    • The commodity price of wheat, corn, and orange juice has doubled. Soybeans are up 50%. Cattle and hogs set record highs.

    • Nearly 40 percent of this year’s 12.447-billion-bushel corn crop will be used to make ethanol.

    • The average American now spends 23% of his income on food and gas. This is a multi-decades high.

    • In March producer prices soared at an annualized rate of 19%, the biggest jump since 1974. Food prices surged 47% on an annualized basis.

    • Average American household debt now stands at 136% of average household income.

    • Consumer spending declined in the first quarter of 2011. A survey by Deloitte revealed that 74% of Americans plan to reduce spending further due to rising prices.

    • There is continuing growth in global trade and from emerging markets. Rapid growth is occurring in China and India, with a rising middle class. Meanwhile in the USA, with its shrinking middle class, the economy slowed again in March and April.

    • Most US economic growth is coming from multinationals operating in overseas markets, whose improved earnings do not translate into American jobs or investment in America.

    • Oil industry executives say US jobs are being sent overseas because of the slowdown in domestic drilling, the moratorium, and lack of permits.

    • House prices declined again in February as the housing market appears headed into a double-dip recession. About 25% of existing home sales are foreclosures.

    • Wells Fargo announced plans to cut 4,500 jobs as the mortgage lending business slows.

    • NASA will close its manned space flight program with the final launch of the space shuttle Endeavour.

    • World Bank president Robert Zoellick warned that the world is “one shock away from a full-blown crisis.”

    • IMF chief Dominique Strauss-Kahn warned that “because of youth unemployment … there is now a risk that this will be turned into a life sentence, and that there is a possibility of a lost generation.”

    • Greece is hopelessly insolvent. Portugal joined Greece and Ireland in seeking a EU bailout. All three countries and Spain saw their sovereign debt downgraded by the rating agencies.

    • The biggest thing driving the bull market in gold and other precious metals is the sovereign debt situation in the Western democracies, particularly in the USA.

    • In two years under Nerobama and his Bolshevik thugs, gold has soared from $868 to over $1500.

    • The IMF has predicted that China’s economy will surpass that of the USA in real terms in 2016.

    • The global stock markets (except Japan) continued to advance, but on thin volume. The US market advance is not based on a solid foundation; the market is being driven by hope and is overdue for a correction.

    • Liz Ann Sonders, Schwab’s Chief Investment Strategist, said the key reason for low stock volume is that hedge fund managers are closing down funds because of the regulatory burdens of Dodd-Frank Act. She said Dodd-Frank is actually reducing liquidity and increasing investment risk in the markets.

    • tranquil.night

      Thank you so much, as always Petronius.

      Those wingnuts sure are upset about something.

    • Right of the People

      But Barry the Impotent’s golf swing is much better now so that’s a plus.

    • merkelerk

      Yeah sure, but Obama showed us his birth certificate and besides, American Idol is on in five minutes.

      Well said Petronius.


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