PlaneBuzz

I'm really getting tired of writing the same old stuff.

You know. "Oil hits new record high."

<sigh>

Alas, it has already done it again today in intra-day trading. Oil traded as high as $126.30 today, until backing down to $125.70, where it is sitting now.

We'll see where it finally decides to land.

Pushing prices up today were rumors making the rounds of the trading floors this morning concerning Iran. The reports had Iran considering cuts in its crude oil production.

As of this afternoon, most analysts feel that the cause for concern was overblown, as Iranian officials denied that production cuts were imminent, but said a reduction has been discussed.

However, look for prices to continue to be volatile this week and next, as traders begin to jockey into position for the June contracts, which will close at the end of next week.

We'll see if we can't rustle up the closing price of aviation fuel later today as well.

Technorati Tags: airlines, oil prices

Posted by Holly at 2:14 PM | Permalink | Comments (0)

Closing price for oil today was $125.96. That is an increase of 2.27 on the day.

Looking at this news today, and absorbing all that has been swirling around the industry this week, including the testimony of both Northwest and Delta Air Lines' execs on Capitol Hill this week, I think there are some things that need to be said.

This week Steve Wallach, chairman of the United MEC of the Air Line Pilots Association issued a statement that said, "We are aware of continued speculation in the media of a possible merger between United Airlines and US Airways, and have serious concerns that the highly touted financial benefits to be derived from such a merger are unlikely to be achieved because these benefits are based on assumptions that have no basis in reality," Wallach said. "We therefore believe that a merger with US Airways should be a last resort and not a first choice for United."

I've been thinking about this statement.

First, who has been touting the "financial benefits" to a merger between US Airways and United?

I certainly haven't heard any, and you sure as heck haven't heard anything remotely close to this coming from Doug Parker or Glenn Tilton.

At least not yet.

So I'm not sure what benefits he's talking about, nor what assumptions. I think it's kind of hard to judge anything until you have something in front of you to pick apart. This smacks to me of the pronouncements from the Delta MEC when US Airways tried to do a deal with Delta. Before the details of the deal were even delineated, the MEC was out trashing it.

And why wasn't the United MEC making similar comments about a potential deal with Continental Airlines? Probably because the pilots at United were too mesmerized with the possibility they could bump up to the Continental pilots' pay rates. As this tidbit was mentioned to me by more than one United pilot -- I have to assume this was the case.

As to his comment that a merger with US Airways should be a "last resort," and not a first choice, I have to really scratch my head on this one.

Steve, Continental Airlines management has rejected a merger with your airline. There are no other reasonable potential partners out there. The out-of-bankuptcy financing package that United entered into when it exited bankruptcy was predicated on a merger or buyout occurring. The airline is too leveraged not to do a deal.

Did you look at the first quarter earnings report from United?

If you did, it should be pretty clear that if things stay "status quo" the airline is going to blow through whatever cash it now has (minus that nice shareholder Christmas present in December) in no short order.

In a perfect world, I don't think anyone would be looking to mergers as an answer to a problematic airline industry. Unless it was maybe those greedy investment bankers.

But this is not a perfect world.

In fact, I'd argue that with oil prices in this range, we're looking at the worst possible world for an airline to make a buck.

We're talking survival here.

And I think that all employees of this industry need to understand that union squabbles and pay rates and everything else are going to have to take second seat to something else -- survivability.

Oh, don't get me wrong. I'm the one who annointed United's Glenn Tilton as the Master of Greed. He received his own special award from PlaneBusiness Banter for it. And I think management at United has not done enough to overhaul its underlying operation. And they did little that required heavy lifting during bankruptcy -- except try and wrangle an ATSB loan and do away with their employee pensions.

But we all have to understand that we have to start looking at airlines as big companies with big infrastructure costs, and lots of moving parts. Some of those parts are making money and some aren't. Some made money at $60/barrel oil. Some still made money at $90/barrel oil. But most of them are not going to continue to make money at $125 or $130 barrel/oil or higher.

When it gets right down to it, the parts that are making money are going to be kept, and the parts that aren't, are going to have to be divested, put on a shelf, or parked in Arizona.

Passengers are going to have to get used to higher fares and fewer flights.

And airline employees are going to have to understand that we should not be surprised if we see airlines pulled apart, with pieces going here and other pieces going there. Furloughs, lay-offs. They are both very distinct possibilities. Talking to one analyst this week he and I were wondering just what airline is going to be the first to announce an across the board cut in employees -- beginning in the fall.

Unless oil drops -- we're going to see this happen.

Delta- Northwest is a perfect example.

Either Delta's Richard Anderson is living in la-la land, (which I don't believe) or I think it's a safe bet that after the merger of these two airlines is approved -- we are going to see cuts and changes that no one has even begun to guess about at this point in time.

So -- a potential merger with another airline should be a "last resort?" I think United and its employees should be happy that there exists an airline that would even consider merging with it at this point in time.

There are many more horrible fates that could befall United Airlines than a potential merger with one of the best management teams in the industry. We all have to understand what the situation is now in the U.S. airline industry. No airline is really immune from potential extinction. But the bigger you are, the better you are managed, and the more resources you can tap -- the better your chances for survival are going to be.

Tickers: (Nasdaq:UAUA), (NYSE:LCC)

Technorati Tags: airline earnings, airline industry news, airline mergers, airline stocks, airlines, ALPA, Continental Airlines, United Airlines, US Airways

Posted by Holly at 5:16 PM | Permalink | Comments (2)

They lower earnings estimates for airlines of course.

What else do they have to do?

This morning analyst Kevin Crissey from UBS issued  a research note in which he said, "The outlook for the US airline industry is changing very rapidly as fuel prices play an increasing role in painting the industry’s profit (well..loss) picture. As a result, our estimates have been getting stale quickly. In response we are moving to a periodic update schedule. We will be updating our forecasts at a minimum every two weeks to reflect changes in fuel and other factors."

He continued, "There is little to like about the financials of the airlines right now. We forecast 2008 losses as large as $10/share (UAUA and LCC) and only LUV will be profitable if our numbers are correct. The extent and duration of the cash burn is the question rather than whether or not there will be profits. We have no Buy recommendations and have a Sell on AMR and JBLU."

As for earnings revisions, Kevin noted, "We are updating our forecasts to reflect recent industry news, most of which has been negative. Our estimates now incorporate the 10-day moving average of forward fuel prices (~$3.40/gal) and include the unit revenue and traffic reports from the carriers. US Airways reported April passenger unit revenue (RASM) growth of flat to down two percent and jetBlue announced an April RASM increase of 3%. Both numbers are on tough comparisons given the shift of Easter to March this year but each also prompted us to slightly lower our Q2 revenue forecasts."

My apologies for the fuzzy chart, but it was reproduced from a PDF and had to be "upsized" before converting it so you could read it.

Posted by Holly at 12:46 PM | Permalink | Comments (0)

Oil closed up 16 cents on the day, ending the day at $123.16.

For those of you with really enquiring minds, the spot price of NY Harbor Jet Fuel closed today up six cents to $3.71 a gallon. Remember that this is just the raw fuel cost - no tax, no "in-plane" expenses.

Posted by Holly at 4:28 PM | Permalink | Comments (0)

As of this posting, crude oil futures are trading at......you sitting down?

$123.69.

This is up $1.85 on the day. Not only that, but once again as we have seen more than once over the last couple of weeks, higher than expected inventory numbers this morning from the Energy Information Administration did nothing to make traders back off from driving the price even higher.

Simply reinforces the belief that U.S. demand is taking second seat to the larger problem of the falling value of the U.S. dollar.

Technorati Tags: airline industry news, airlines, Economy, oil prices

Posted by Holly at 1:36 PM | Permalink | Comments (0)

Hey, don't shoot the messenger.

Posted by Holly at 4:10 PM | Permalink | Comments (0)

As of this posting, crude oil futures are trading at $121.65, up 1.68 just since the open.

But that's just the tip of the iceberg this morning when it comes to bad news about oil prices.

Those who have been watching the rise of oil the last few years may recall when Goldman Sachs issued a research note in the spring of 2005. To say the note was controversial at the time would be an understatement. In that note, analysts at the investment firm wrote about a "super spike" in oil prices that could occur pushing oil prices between $50/barrel and $105/barrel until 2009.

This morning Goldman Sachs analysts issued an updated note saying that crude prices are now poised to potentially rise between $150 and $200/barrel. "The possibility of $150 to $200 per barrel seems increasingly likely over the next six to 24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the up-cycle remains a major uncertainty," the note said.

Why?

No surprises in their reasoning.

Demand growth is outpacing output growth. China has more than doubled oil use since New York crude dropped to $16.70 a barrel in November 2001. That has basically taken up most of the world's spare capacity, while at the same time supply has been cut in Nigeria, Iraq, and Venezuela.

Spare production capacity of the Organization of Petroleum Exporting Countries (OPEC)  is low, and the group's exports could easily fall because of "lackluster" supply growth and rising domestic consumption in member countries, the Goldman analysts added.

Underscoring this, Indonesia yesterday said it might quit OPEC as it consumes more oil than it produces, and lowered its oil sales estimate for 2008 to 927,000 barrels a day from 950,000.

Posted by Holly at 10:30 AM | Permalink | Comments (0)

Not quite $120, but close enough.

Posted by Holly at 4:30 PM | Permalink | Comments (0)

And you wonder why I opened up today with sports musings?

Earlier this morning the price of a barrel of crude hit $120 plus in trading. As of this posting, it's hovering around $119.90 and change. Stay tuned.

Not too far removed from the issue of higher oil prices is the news today that United Airlines is probably going to ask its bankers that hold its debt, which include JP Morgan Chase, and Credit Suisse for some "concessions." Or to put it another way, United looks like it wants more "wiggle room" in terms of its credit facilities.

The Financial Times reported today that "While United has maintained that it has enough cash and earnings to remain in compliance with the credit facility's terms, concerns about its financial health helped persuade Continental Airlines Inc. (CAL) to end merger negotiations, people familiar with the matter have said."

Sounds about right to us.

Wouldn't it be nice if you and I had the same option? You know -- your car payment putting just a bit too much strain on your monthly finances? Well, just call up Chase and ask them to re-negotiate that car loan. Piece of cake. Or call  Bank of America and ask that your mortgage be re-negotiated for a longer term.

Unfortunately things don't seem to work that way.

Posted by Holly at 12:55 PM | Permalink | Comments (1)

For those of you with enquiring minds.

Posted by Holly at 2:48 PM | Permalink | Comments (0)

Holy $%(@ Batman.

What a morning.

It took me more than an hour just to get through the emails. Then almost another hour reading all the great earnings news. NOT.

Wow, where do we start?

First, let's take a look at the price of oil. It's on the march again -- and looks like we are going to hit yet another record today unless something major changes between now and the close of trading.

Right now a barrel of crude is trading at about $119.50.

$120/barrel here we come.

But that may not be the worst news out there for the airline industry this morning.

No, United Airlines looks like it took care of that. Then again, AirTran is not too far behind.

First -- United Airlines posted a horrible set of first quarter numbers today. Horrible.

The airline reported a loss of $537 million or $4.45 a share. This did not compare favorably, as they say, to last year, when the airline reported a loss of $152 million or $1.32. Analyst consensus here had been for the airline to post a loss of $3.41 a share -- so it is no wonder why shares are now down about 32% ON THE DAY.

Shares in United, as we post this, are down 34% to 14.24.

Meanwhile, shares of AirTran are being beaten up as well. Shares here are presently down 23%, trading at 3.50.

Kind of strange thing with AirTran. The airline moved up its earnings call on very short notice to today. It was originally scheduled for Thursday.

I figured it was so the airline could come out and reassure investors about its  credit card processing hold back situation, cash levels, etc.

No.

Instead, the airline announced this morning that it was going to do a $65 million convertible note offering -- an acknowledgment that yes, it is short on cash. Oh, and the airline didn't post very encouraging first quarter numbers either.

The airline reported a first- quarter loss of $34.8 million or $0.38. This compares to last year, when the airline posted a profit of $2.16 million, or $0.02.

Analyst consensus here had been for the airline to post a loss of 32 cents, so while the airline missed, it wasn't as big a miss as United. But the results, along with the airline's liquidity issue, was still enough to spook the street.

Finally, JetBlue also reported earnings today, and considering the results posted by its two competitors -- the airline did pretty well.

JetBlue posted a loss of $8 million or $0.04 in the quarter. That is an improvement from a loss of $22 million or $0.12 in the first quarter of 2007, and was three cents better than the analysts' consensus figure of a loss of 7 cents.

Remember though that comps here were relatively easy for the airline -- the result of last year's St. Valentine's Day Meltdown.

If you haven't looked at your favorite airline stock today, I'd recommend caution. As of this posting, every airline stock is down for the day -- with some stocks posing very large declines. Throwing out the aforementioned selloffs in United and AirTran, it's clear that investors are not looking at the proposed Delta-Northwest deal as a trip to nirvana, as shares of Delta are now down 13% to 7.12, and shares of Northwest Airlines are down 15% to 7.74.

Even shares of Continental are not immune to the pressure this morning, as they are now down 12% to 18.30, while shares of AMR are down 11%, trading at 7.30.

Yikes.

Technorati Tags: airline earnings, airline mergers, airlines, AirTran, American Airlines, Continental Airlines, Delta Air Lines, jetBlue, Northwest Airlines, United Airlines

Posted by Holly at 11:41 AM | Permalink | Comments (0)

Another nasty day in the energy futures trading pits.

At one point, the price of a barrel of crude oil traded over 115/barrel. But when all the shouting was over, light crude closed at 114.93/barrel, up 1.14 on the day.

This, after news this morning from the Energy Information Administration showed that crude oil inventories dropped down 2. 3 million barrels last week, to 313.7 million.

The consensus forecast of those who follow such things was that we should have seen an increase of 1.5 million barrels.

In addition, the euro hit a new all-time high against the dollar today. Here's the two-year chart tracking the increase in value of the euro to the dollar.

In case you haven't noticed -- when the dollar drops against the euro, you can pretty much count on an increase in the price of oil.

And we all know why that is. With the price of oil pegged to the dollar -- as the dollar drops in value against the euro -- there is then reason for traders to bid the price up.

Yes, this is one of the ugly side effects of the Federal Reserve continuing to lower interest rates. The lower the rates, the more the dollar drops in value compared to other currencies. Meanwhile, commodity prices continue to go higher and higher.

A nice fine economic mess, now isn't it Ollie?

Or as one Wall Street-employed airline analyst said to me off the record today, "Oil scares the living shit out of me."

Yep. Me too.

Posted by Holly at 4:42 PM | Permalink | Comments (0)

Yep, oil futures did set a new record today when all the shouting was done.

Crude oil futures closed at 113.79 -- up more than $2 on the day.

More bad news. Oil futures are up as high as 114.08 in after-hours trading.

Posted by Holly at 6:22 PM | Permalink | Comments (0)

At the recent Phoenix International Airline Symposium, Lehman Brothers analyst Gary Chase said something I thought was worth repeating.

Actually he said more than one thing that was worth repeating.

But given the events in the energy markets the last two days, I'm going to pick his comments about how everyone in the industry was talking about "$100 a barrel oil." Paraphrasing, he said something like, "Who says this is going to stay at $100? It seems like some people in the industry are looking at this as some arbitrary cut-off point. That they are revamping spreadsheets to take that number in account. What about $130/ barrel oil? $150 a barrel? Who says that oil is going to continue to hover around $100/barrel?"

As I talked about in a recent issue of PlaneBusiness Banter, he then went on to explain just what massive changes we could begin to see -- when, not if, oil began to move even higher.

Well folks, today the price of oil is inching closer to that $130 mark.

Yesterday oil closed at a new all-time high price of $111.76.

Today, it's up again.

As I post this, light crude oil futures are trading at $113.60, up 1.84 for the day.

Posted by Holly at 11:06 AM | Permalink | Comments (0)

Another day, another day of carnage for airline stocks. Three in particular, including one notable newcomer.

With Frontier Airlines going into Chapter 11 bankruptcy protection, it's no surprise that shares here were down dramatically on the day. Shares ended the day down a whopping 69%, on more than five times the normal volume, as the stock ended trading at 48 cents. (It started the day at 1.57.)

Shares of Mesa Air Group also had another bad day. Shares here were down 17%, ending the day at 67 cents. The stock started the day at 81 cents. Market Cap here is now down to $18 million and change.

And finally, we had a notable newcomer to the share sell-off club today -- another member of the PlaneBusiness Titanic Watch. AirTran shares were simply hammered today, as they lost 35% of their value, closing at 4.13. The stock opened this morning at 6.31.

Again, volume here was more than five times the norm.

What's going on here? My guess is that It's a little thing about credit card holdbacks. The same reason Frontier sought Chapter 11 protection today. Investors apparently don't like the airline's cash position, relative to what could happen if the airline's credit card processor decides to up its reserve amounts for the airline.

Oil? Oil today closed at 110.14/barrel, up 3 pennies on the day.

Tickers: (Nasdaq:MESA), (Nasdaq:FRNT); (NYSE:AAI)

Technorati Tags: airline stocks, airlines, AirTran , Frontier Airlines, Mesa Air Group

Posted by Holly at 3:47 PM | Permalink | Comments (0)

Wednesday is the day the government releases its energy inventory information -- and depending upon the news the markets can either be made happy -- or nervous.

The result today? Nervous. And when that happens we all know what that means. Yep, higher prices.

The nation's stockpiles of crude fell to 316 million barrels for the week ending April 4, the Energy Information Administration reported this morning.

This was down 3.2 million barrels on the week. Analysts surveyed by Platts had been looking for an increase of 2.7 million barrels.

But wait, there's more.

U.S. gasoline supplies fell 3.4 million barrels in the latest week, while distillate supplies, which include heating oil, diesel and jet fuel, dropped 3.7 million barrels.

Both of these are bigger than expected drops as well.

You all know what's coming next. Yep. Bad news.

The price of a barrel of crude is now trading at about 111.30, as it has shot up almost $3 on the day.

Update: Oil ended the day at 110.87.

Posted by Holly at 12:04 PM | Permalink | Comments (0)

Today was "sell the commodities day" on Wall Street.

All the nervous nellies who climbed into oil futures, gold, and other commodities over the last week as the financial stocks went through their personal meltdown, decided, apparently, that today it was time to unload them.

That was why, when it was reported that crude oil inventories did not increase as much as had been expected in the U.S. last week -- oil prices declined anyway.

Usually, we'd see the price rise.

For the day, the price of a barrel of light crude was down almost $5, ending the day at $104.48.

Posted by Holly at 4:41 PM | Permalink | Comments (0)

Red Letter day today on Wall Street. For two reasons.

One, the price of gold topped $1000/ounce earlier today.

But more importantly -- at least to those of us who like to fly the those things with wings that consume great quantities of jet fuel -- the price of a barrel of crude oil broke the $110 mark today.

Crude closed at $110.33.

How does that story begin....."It was a dark and stormy night...."

A recession and $110/barrel oil prices. A perfect dark and stormy night for our friends --  the airlines.

In other news, shares of Mesa Air Group hit a new 17 year low today. (Adjusted for splits.) The last time shares were this low in the airline were in 1991. Shares in the airline closed today down 3%, to 2.24.

Shares of US Airways have also been hit hard this week. Today shares of LCC were down another 3%, closing at 8.76. Yes, you read that correctly.

Shares of Northwest are not having a good week either. Shares here were down 4% today, closing at an anemic 9.86 while shares of its hoped-for running buddy, Delta Air Lines, were up 4% today, closing at 10.52.

Meanwhile ExpressJet shares managed to pick up 2% today. But the shares here continue to struggle. Really struggle. Shares closed here today at 1.77.

Ticker: (Nadsaq:MESA), (NYSE:XJT), (NYSE:NWA), (NYSE:DAL), (NYSE:LCC).

Technorati Tags: airline stocks, airlines, Delta Air Lines, ExpressJet, Mesa Air Group, Northwest Airlines, US Airways

Posted by Holly at 8:11 PM | Permalink | Comments (0)

The government was out this morning with its latest oil inventory numbers. Not that U.S. inventory numbers have had THAT much to do with the latest run-up in the price of oil - but clearly a surprise on the upside would normally cause traders to back off a bit -- and that is exactly what we are seeing in the markets this morning.

U.S. crude inventories rose more than expected, up 6.2 million barrels to 311.6 million barrels for the week ending March 7, the Energy Information Administration reported on Wednesday. analysts surveyed by Platts had expected an increase of only 1.6 million barrels. While gasoline supplies rose by 1.7 million barrels in the latest week, distillate stocks fell by 1.2 million barrels. Distillates include jet fuel -- so that is not necessarily good news.

As I post this, a barrel of crude is now priced at about 107.55, down about 1.20. Not a lot to get excited about but at this point, we're happy for any decline.

Posted by Holly at 10:27 AM | Permalink | Comments (0)

Put gas in your car lately? Yes, well multiply that feeling by about a million gallons a day and you'll get a small idea of what airline CFOs feel like these days.

If this keeps up, maybe we should all chip in and contribute to an "Airline CFO Antidepressant" fund. Nah. We probably need to keep our own dollars in the bank to pay off our own gasoline bills.

Today the price of a barrel of crude oil closed at a new high -- $100.88. This was an increase of $1.65 over yesterday's close. The price actually went as high as 101.06 during the day.

Wheeeeeeee.

Posted by Holly at 7:25 PM | Permalink | Comments (0)

In case you're wondering why it was that airline stocks went boom today -- the reason was the usual suspect. That reason was the rise in the price of oil.

Today the price of a barrel of crude picked up a cool 2.19, closing at 95.46.

By the way, anyone looked at the price of platinum lately? Hey, maybe some of you were thinking of giving something made of platinum to your sweetie for Valentine's Day. So my question to you would be -- did you buy it? Conversely, if you had been expecting something made of platinum at the bottom of your box of Godivas, did you get it?

The reason I ask this is because the price of an ounce of platinum closed at a whopping 2012.00 today. Gold, meanwhile, closed at 911.00. New record for platinum. Gold hit its high in January at 927.10.

Every time I look at the price of gold, I keep thinking about the car driver in Phoenix I used to use to pick me up at the airport -- he was originally from New York and a little over three years ago he and I had a big discussion about gold. He told me he had decided it was time to buy some. He told me he was going to shed some of his stocks and buy about $30K of gold stocks.

I hope he did. It was priced around $375 an ounce at the time.

Posted by Holly at 8:13 PM | Permalink | Comments (0)

Nice while it lasted.

I guess.

Today it looks like the price of crude will end the day up about 2.4%, closing at $89.42. Or thereabouts.

Posted by Holly at 2:06 PM | Permalink | Comments (0)

One of the most glaring good news/bad news situations we have on Wall Street in regards to the airline industry is, of course, the issue of oil prices.

The generally accepted economic theory is that when the economy tanks, oil prices should drop because it is expected that lower economic activity means lower demand for energy products.

Unfortunately, while many kept thinking this scenario would happen in 2007 -- given the growing banking, real estate, and mortgage mess -- it didn't.

But now, at least for the time being -- it does appear that the markets may finally be thinking, "Okay, this is really going to be a global slowdown --and if it is a global slowdown, oil prices need to come down."

That's the good news. Of course the bad news is we would not be having this conversation if the economy was rockin' and rollin'.

Then again, with oil prices where they are now -- one has to wonder if the rules regarding this economic  situation have not been somewhat modified over the last few years. In other words, oil is still, even after a week or so of continued declines, trading at $86 a barrel.

But I digress.

The long and the short is that oil prices continued to drop today. And hey, we'll take it. At the close of trading, crude oil was at 86.99, down more than 2% on the day.

Posted by Holly at 4:28 PM | Permalink | Comments (0)

Another day, another blockbuster day for oil prices.

After hitting $100 briefly yesterday, and then retreating, oil prices today hit $100 after less than expected oil inventory figures were reported this morning by the DOT's Energy Information Agency.

Today, the price stuck above the historical mark a little longer, although in the last update I saw, the price had dropped back to $99.05.

And for those of you who are wondering where that magical "record-breaking" number is -- taking inflation into consideration? Most experts use the $102 mark as the level at which the price of oil would then bypass its previous historical all-time high -- ever.

Posted by Holly at 1:41 PM | Permalink | Comments (0)

As if you smart guys could not figure out why it is that airline stocks are getting the smackdown treatment today -- a big reason is you-know-what.

Yes, the price of oil is rearing its ugly head today again.

As of this writing, it looks like the price of a barrel of crude is now up more than $3. In one day.

Crude is currently trading at around $98 a barrel.

Technorati Tags: airlines, crude oil, oil prices

Posted by Holly at 2:15 PM | Permalink | Comments (0)

I had a friend send me a note this weekend, asking me about Southwest's hedging positions for the rest of the year and into 2008. Since I am on kind of an oil-centric kick today, I thought it might be of note to relay what I said to him as well.

His question was simple. Does Southwest have advantageous hedge positions going into 2008 -- or is this not the case? Since he had not heard much about their positions, he was assuming the airline did not.

Not correct.

The fact is, the higher the price of oil goes, the more advantage Southwest gains on its competitors, as the airline is sitting on some very nice hedge positions.

In the airline's recent earnings call, CFO Laura Wright said that the airline now has 90% of its fuel hedged at $51 a barrel for the fourth quarter.

In 2008 the airline has 70% of its fuel needs hedged at about $51 a barrel, and in 2009 the airline also has approximately 55% hedged at about $51 a barrel. In 2010, over 25% of the airline's fuel needs are hedged at approximately $63 a barrel, and in 2011 and 2012 the airline has over 16% of its fuel needs hedged at approximately $64 and $63 a barrel respectively.

Very nice.

Funny. I am reminded of the comments that JetBlue then CEO, and now Chairman, David Neeleman said more than a few times a couple of years back. Remember when he said he hoped oil would continue to rise -- that JetBlue had such low costs -- it would be no problem for the airline if oil went to $80 a barrel or $100 a barrel. It was Neeleman's equivalent of the "Bring it On" type of pronouncement.

David Neeleman is a gifted person in some respects -- but that was not one of his shining hours.

Ticker: (LUV:NYSE)

Technorati Tags: jet fuel, jetBlue, oil prices, Southwest Airlines

Posted by Holly at 4:54 PM | Permalink | Comments (0)

Good day for airline stocks today. The price of oil dropped back $3.45 to $91.17 and only three airline or airline-related stocks we track here at PlaneBusiness were down on the day.

On the not-so-good news front, however, as a person who, just like you, puts gasoline in his or her car on a regular basis, the price of gasoline is now beginning to reflect the increase in oil prices we've seen over the last month.

A fact I was ruminating over today when I went to the Post Office and saw a soccer Mom tooling around in a new burnt orange Hummer. Keeping that thing fed these days must cost the equivalent of some people's rent payment.

Technorati Tags: oil prices

Posted by Holly at 3:44 PM | Permalink | Comments (0)

United Airlines announced today it would add a surcharge of $5 each way to tickets for most domestic flights to offset the price of jet fuel.

The No. 2 U.S. carrier said the surcharge will be incorporated into fares for travel within the United States, excluding Hawaii.

Ticker: (UAUA:Nasdaq)

Technorati Tags: jet fuel, United Airlines

Posted by Holly at 1:58 PM | Permalink | Comments (0)

I may sound cynical, but my reaction is, it's about time.

Can we please get rid of the "Alice in Wonderland" thinking now? Or, rather, the "techs are strong and that will save the market" thinking?

This morning crude oil continues to pick up ground, (hovering around $97.40 as of this writing) while we have more banks talking about more billion dollar writedowns, and those banks which have already confessed to mortgage debt-related write-downs are now talking about even more on the horizon.

This morning it was announced that retail sales for October were, er, mixed to down.

Thomson Financial, which compares monthly results at 43 of the nation's largest retail chains, said October same-store sales overall rose 1.6 percent, weaker than its initial forecast of a 2 percent rise. Same-store sales in October 2006 rose 3 percent.

Last month's lackluster performance follows a 1.4 percent gain in September, which was the slowest monthly same-store sales gain since August 2004.

Notable in their gains for the month? Target, Costco, and Saks. Interesting.

Then there is the issue of the dollar. Been to Europe lately? Good luck. As of this writing, the euro is hanging at almost $1.47.

Thinking of getting married in the near future? Be prepared to spend more for the bling. Both gold and platinum are continuing their record-making climbs today -- as commodities prices in general continue to surge.

And finally, there was Big Ben's pronouncements this morning to Congress. The Chairman of the Federal Reserve told Congress this morning that the U.S. economy not only faces the risk of a sharp slowdown from the housing market's contraction but also of an inflationary surge from sharply higher crude-oil prices and the weaker dollar.

Sharp guy that Bernanke. Wonder how he came to these conclusions.

Bernanke said that the policy-setting Federal Reserve Open Market Committee expect the economy to slow "noticeably" from the third-quarter growth rate and remain sluggish in the first half of 2008. But Bernanke also suggested that the hawkish members of the Fed might have a point about inflation. There were downside risks to the subdued growth forecast, and upside risks to the benign inflation outlook, Bernanke said.

Oh, and the Things with Wings?

They're getting beaten up today on Wall Street. All the airline stocks we follow were in the red, last time I checked, with the exception of Republic, SkyWest, and WestJet.

Technorati Tags: Ben Bernanke, crude oil, Economy

Posted by Holly at 11:20 AM | Permalink | Comments (0)

In light of the mounting evidence that the economy is falling apart -- United Airlines said today that if demand starts to fall off noticeably, the airline will either have to raise fares or reduce capacity -- given the specter of $100 a barrel oil.

According to Dow Jones, United CFO Jake Brace told those at the Goldman Sachs Transportation Conference in New York yesterday that with crude oil prices approaching $100 a barrel, United and other airlines eventually will have to deal with those skyrocketing prices by either raising fares further or reducing capacity rather than flying with too many empty seats.

"Either the industry passes on the higher fuel prices or we're going to have to lower capacity, but you have to make the equation work," he said in comments to the conference in New York.

Brace said United has a little more than 100 aircraft unencumbered by debt, including 50 Boeing 737s, "that we could ground whenever we needed to if the demand environment were such that it didn't make sense to fly those planes."

The 100 planes would represent more than a fifth of United's mainline fleet of about 460 aircraft, as of Dec. 31.

It also has 13 narrow-body airplanes and one 757 coming off lease in 2008 that also could help it adjust capacity.

Ticker: (UAUA:Nasdaq)

Technorati Tags: airline analysts, airline industry news, airlines, airplanes, United Airlines

Posted by Holly at 11:08 AM | Permalink | Comments (0)

Attired comfortably in my Ratty Old Bear Suit, I am perfectly calm and collected as I say this.

What does the market expect is going to happen when the Fed cuts interest rates again -- in an effort to bail out the growing mortgage debt/banking mess? That's right. The dollar is going to drop further, and the price of oil is going to go even higher.

Be careful what you wish for is what I say.

Today, a barrel of crude closed at $96.70 -- another new record. At one point, it was trading as high as $97.10.

Posted by Holly at 4:22 PM | Permalink | Comments (0)

Whew. Has everyone recovered from Halloween mirth and merriment yet?

Not sure that was the case on Wall Street today, where things took a decidedly scary turn, with the Dow Jones ending the day down more than 360 points -- as the giddyness of yesterday's rate cut gave way to the more gritty reality of an economy that far from healthy.

Oh, and the price of oil? It closed at $93.49.

Us? We've been working on this week's issue of PlaneBusiness Banter.

Which reminds me. This week's issue should be posted tomorrow. And yes, hopefully this is our last mega-earnings issue. Yee haw!

Funny thing though. All six airlines we're talking about in depth this week -- posted good earnings for the quarter.

Always nice to talk about that.

All for now. We'll touch base with you manana.

Posted by Holly at 8:44 PM | Permalink | Comments (0)

Trick or treat! The dollar hits a new all-time low, oil hits a new all-time high, and Wall Street rallies on news of a rate cut.

I think Wall Street has a bipolar disorder. It's the only place I know where it's time to celebrate because the Federal Reserve has been forced to cut rates because the housing market has fallen off a cliff.

Meanwhile, as we cut rates, those overseas continue to shake their heads  -- and bid up the price of oil -- which now costs them less than it did a month ago because the dollar continues to drop in value.

Got that? Okay. Forget it. It's time to go trick or treating.

Posted by Holly at 5:58 PM | Permalink | Comments (0)

Uh-oh.

Traders were not happy when the government reported the latest oil inventory figures today. They don't like surprises, and after last week, the last thing they expected was to see the level of crude inventories drop ...again.

But they did, and the result has been a thrill ride in the trading pits.

Crude supplies fell by 3.9 million barrels to 312.7 million barrels in the week ending Oct. 26, the Energy Information Administration said Wednesday. Analysts had expected a build of 1.25 million barrels in crude stocks.

Refinery production was also sharply lower.

At last check, a barrel of light crude was now trading at about $94/barrel.

And here's even more bad news. If the Fed announces another rate cut -- look for the price of oil to surge even higher. That Fed announcement should come out here shortly.

Posted by Holly at 12:39 PM | Permalink | Comments (0)

Read it and weep.

"Pushing prices higher today? Mexico's state-owned Petroleos Mexicanos, one of the largest crude suppliers to the U.S., halted production of 600,000 barrels a day due to inclement weather on Sunday. Petroleos Mexicanos, also known as Pemex, said it hopes to resume production in days.

Mexico is U.S.'s second largest crude supply country after Canada, shipping 1.66 million barrels a day in the first eight months, according to the Energy Department. Pemex is Mexico's largest company with annual revenue of nearly $100 billion. It's also the third largest producer of crude oil in the world, according to the company's website."

Posted by Holly at 4:42 PM | Permalink | Comments (0)

This is getting to sound like a broken record.

How could I forget jet fuel? Yes, well, maybe it would be better if we all could just forget jet fuel.

New York harbor jet fuel closed at $2.56/gallon today. New record.

Posted by Holly at 3:53 PM | Permalink | Comments (0)

Another day, another record close for crude oil today. Oh, and for those of you who heat your home with heating oil, it too set a new all-time record today. Heating oil closed at $2.43 a gallon in New York.

Technorati Tags: airline industry news, airlines, crude oil

Posted by Holly at 3:48 PM | Permalink | Comments (0)

Not a record most airline CFOs are going to like to see.

Technorati Tags: airlines, jet fuel, airline industry news

Posted by Holly at 2:43 PM | Permalink | Comments (0)

Official closing price for a barrel of NY light crude.

Technorati Tags: airline earnings, airlines, crude oil

Posted by Holly at 2:06 PM | Permalink | Comments (0)

As all good observers of the energy markets know, it does not necessarily follow that when crude prices rise, jet fuel prices do the same.

But today, sorry to say, this is the case.

We just hit a new all-time high for crude oil, as prices have surpassed the $90 a barrel mark. The price is bouncing around -- it has been as high as $90.60, then back down to $90.10.

Posted by Holly at 1:56 PM | Permalink | Comments (0)

Don't look now, but jet fuel is currently flirting with an all-time record high in trading today.

Yes, this is having a very negative effect on airline shares.

Last time I looked, New York harbor jet fuel had risen to $2.491 a gallon. If it stays at this level, or goes higher, we'll set a new record. The previous high for New York harbor jet was $2.487, which was set on Sept. 29, 2005.

Technorati Tags: airline stocks, oil prices, jet fuel prices

Posted by Holly at 1:47 PM | Permalink | Comments (0)

Just in time to note yet another earth-shattering all-time high record for the price of crude oil.

Yes, ladies and gents, the price of a barrel of light crude closed today at $89.47.

Posted by Holly at 3:02 PM | Permalink | Comments (0)

Have you become used to $80 a barrel oil? Get over it.

Today, on the back of less than bubbling inventory levels reported by the Department of Energy, the price of a barrel of light crude is off and running. Again.

Looks like we could have another all-time high mark recorded by the end of this week.

As of now, a barrel of crude is trading at about $83 and change.

The U.S. weekly oil inventory data showed crude stocks fell by 1.7 million barrels compared to the previous week, sharply undercutting analysts' expectations of a rise of about 1 million barrels.

On the good news side, gasoline inventories increased by 1.7 million barrels, against expectations of a 300,000 barrel decline. Distillates, meanwhile, which includes jet fuel, came in line with predictions, falling 600,000 barrels for the period.

The news comes on the heels of a strike of oil workers in Nigeria, and news of the fifth fire in two months for BP in its North Slope fields of Alaska. The fire will cause production from Prudhoe Bay to be cut by at least 30,000 barrels a day for about two weeks. The Prudhoe Bay field is the largest in the U.S.

Technorati Tags: airline stocks, oil prices

Posted by Holly at 10:56 AM | Permalink | Comments (0)

Throw in a Gulf of Mexico storm to the existing market concern over lower crude inventory levels and here you go. Oil was up a whopping $1.39 today.

Gasoline was also up. Unleaded gained 4 cents on the day to $2.14. (Remember this is a raw number, without taxes or anything else added to it.)

Because today is the day we do the weekly energy numbers for PlaneBusiness Banter as well, here is a treat --  updated jet fuel numbers. Gulf Coast jet fuel closed up 3.5% this week to $2.34 a gallon, with New York jet fuel closed at $2.39, up 2% on the week.

Same caveat to the jet fuel prices. These numbers are "raw" numbers.

Posted by Holly at 5:03 PM | Permalink | Comments (0)

Speaking of oil and fuel prices...

Crude was up today, although it did recover a bit during the day, after jumping this morning on news that crude oil supplies had come in last week lower than expected.

Light crude was  up 42 cents on the day.

Technorati Tags: airlines, crude oil

Posted by Holly at 4:23 PM | Permalink | Comments (0)

Hey, you think I put potential Gulf of Mexico storms on here only because the Worldwide Headquarters is located in the swamp?

Au contraire.

Think beyond the obvious!

And I quote,

"Shell has begun evacuating non-essential personnel from its platforms and operations in the Gulf of Mexico in advance of a tropical disturbance off the Florida coast. Precautionary evacuations began today in which 300 people were brought inshore. The company plans to evacuate about 400 more people Wednesday, the company said. Production has not been impacted."

That's all the info oil traders need to start the engines revving tomorrow.

Technorati Tags: crude oil

Posted by Holly at 8:06 PM | Permalink | Comments (0)

I know. Speaking of records, I sound like a broken record.

Crude oil hit another new high today. $81.51/barrel.

Technorati Tags: crude oil

Posted by Holly at 3:09 PM | Permalink | Comments (0)

From MarketWatch:

"US Airways said Wednesday it plans to hire more than 350 new pilots with training dates beginning in November 2007. The Tempe, Ariz.-based airline also said it will move 140 pilots, who currently fly for US Airways Express carriers, back to mainline flying after they were furloughed several years ago. US Air said its pilot staffing needs are being driven primarily by retiring pilots. US Airways shares fell 3.9% to $29.94 in Wednesday morning trade."

Speaking of falling airline stocks -- it's not just LCC. With oil prices hitting new all-time highs, it's not a good day for airline stocks across the board today on Wall Street.

Technorati Tags: airline stocks, airlines, US Airways

Posted by Holly at 1:17 PM | Permalink | Comments (0)

Was just reading over some recent analyst reports over the last week and in more than one the issue of the "lower price of fuel" was mentioned in the same sentence as third quarter forecasts and fourth quarter estimates.

Hmmmm.

You might want to think about those comments after the last three days in the futures markets.

We noted yesterday that the price of a barrel of crude had hit a new all--time high.

Today, after the government reported very weak energy inventory numbers, it has been off to the races for oil traders.

As of this posting, crude is now trading at a new high, at 78.90. Intraday, the price has already shot up beyond $79.

Technorati Tags: airlines, crude oil

Posted by Holly at 11:35 AM | Permalink | Comments (0)

The Energy Information Agency reported this morning that crude oil inventories fell by 6.5 million barrels last week. Analysts had forecast a drop of 700,000 barrels, according to a Reuters poll.

Distillates, used to make heating oil, jet fuel, and diesel fuel, rose by 2.8 million barrels while gasoline supplies gained by 600,000 barrels. Analysts were looking for a 1.4 million barrel build in distillates supplies and a 500,000 barrel increase in gasoline stockpiles.

The big drop in crude inventories caused oil to break its previous all-time record trading high of $78.40, hit last July following Israel's invasion of Lebanon and fears the conflict could spread to the broader Middle East.

As of this posting, crude is cruising along at 78.45/barrel.

If you are a studious follower of the crude oil/jet fuel game, there is good news and bad news in this release this morning. One, it's clear refineries are continuing to crank out more production. This is why we have seen the crack spread continue to fall over the last month, and why, for the most part, jet fuel prices have held relatively steady while oil prices have continued to rise.

Fine for now.

But we could start to see jet fuel prices begin to rise again, as refineries begin to shift over to more heating oil production (in anticipation of winter heating season), and crude oil prices remain high.

And then there is the hurricane factor.

We haven't had one form yet -- but it looks like things are finally beginning to get interesting off the coast of Africa. Meanwhile, tropical storm Chantal, which formed this week out in the Atlantic off New England, continues to churn her way up off the coa