PlaneBuzz

Want to know why most all airline stocks sunk like they had rocks tied to their little feet today?

That's right. Give the man in the back row with the red shirt on a gold star.

It's oil. Or rather, the exploding price of oil.

Crude oil futures closed at 81.37 today -- up a hefty $2.25.

Why? One major factor-- the continued drop in the value of the dollar. The euro climbed about $1.50 today, the highest level since August 2008.

And as all bright PlaneBuzz readers know -- oil is priced in dollars. So as the dollar falls in value, international investors start bidding up the price of oil futures as a play against the weakening U.S. currency.

That's the way the markets work.

Posted by Holly at 5:25 PM | Permalink | Comments (0)

This week the U.S. domestic carriers have been in the throes of the usual first-week-of-the-month traffic and RASM reporting ritual.

And what have we found out from the various press releases full of mind-numbing numbers?

I think Gary Chase, analyst with Barclays started the week off on the right tone as he wrote, "We think the market was largely ready for numbers as bad as CAL posted last night, even if we had hoped for better."

Continental reported at the beginning of the week that it estimates the H1N1 scare cost the airline at least $30 million in revenue. This was more than many analysts had expected, and was clearly a big factor in the airline reporting that consolidated PRASM for May was down between 19.5% and 20.5%. Mainline only was down between 19% and 20%.

Friday morning Bill Greene, analyst with Morgan Stanley issued a note in which he said, "Recent, May traffic reports highlight the severity of the supply/demand differential plaguing the industry with RASM falling ~20% YoY at both CAL and LCC. Surprisingly, managements continue to bet on a 4Q recovery, as evidenced by the sequential acceleration in capacity growth between 3Q and 4Q09.However, even if a rebound does materialize, we worry that higher oil prices obstruct profit-improvement at many airline."

Looking towards June, as I wrote in this week's PBB, I am not hearing much of anything positive from the airline folks I am talking to -- in terms of demand uptick.

Kevin Crissey, analyst withUBS wrote this week, "Airline financials are troubling, particularly with fuel prices rising." He continued, "We are concerned about the revenue outlook after May," said Crissey, who forecasts that June traffic "will be 2 to 3 percent worse" than May and "July could look like May. The forward curve for fuel is higher."

Of course, as has been the case over the last year, there is one domestic airline that just keeps bucking the drop in demand trend. That airline is Allegiant Air, the airline portion of Allegiant Travel.

The airline reported Thursday that its total RPMs rose 20.1% while capacity was up 19%. While this resulted in only a 0.8 point increase in load factor for the month, you can pretty much be assured that this is going to be the most positive combo of demand and capacity that will be reported for the month.

Scheduled service at the airline increased 23.9% while capacity jumped 22.9%. Load factor increased 0.7 percentage points to 90.6% from 89.9%.

Both AirTran and Southwest Airlines announced drops in load factor this week.

Remember that these declines also came as both airlines were engaged in pretty stiff fare competition, so we can pretty much figure both airlines posted some healthy declines in yield and RASM as a result.

US Airways, which also reports RASM estimates, as does Continental, reported on Wednesday that its mainline traffic declined 5.2% on a 5.8% cut in capacity. As a result, the airline actually posted a .5 point increase in load factor.

However, as Bill Greene mentioned in his note on Friday, the airline also said that its consolidated PRASM fell between 18% and 20% during the month.

Also note that American Airlines saw traffic fall much more than the airline's capacity cuts -- as the airline reported that mainline traffic declined 11.7% in May, on a capacity decline of only 8.8% This resulted in a 2.6 point drop in load factor for the month. Ouch.

Posted by Holly at 10:40 AM | Permalink | Comments (0)

In the midst of all the giddy sentiment that is starting to take hold in the industry concerning the "stabilization" in demand decline -- a fact that April RASM estimates issued by some airlines have fueled this week -- a new ugly problem is starting to make itself known. That ugly problem? Higher fuel prices.

As they say, if it's not one thing, it's another in this industry.

The big question concerning the recent relatively calm period of lower oil prices was this one -- how fast would they start to ratchet up when the economy began to shows signs of recovery?

We, unfortunately, are starting to see that apparently the answer to that question is -- pretty fast.

If you have not looked at the oil futures market lately, here is the bad news. As I post this (at about 1:30 PM CDT), the price of a barrel of crude is now sitting at 58.55, up almost $2 bucks for the day. Just two weeks ago, the price of crude closed at 50.80. Last Friday, it closed at 53.20.

Today's price is the highest price that crude has posted since November.

What is fueling the push?

A combination of some encouraging signs on the economic front, U.S. equity markets that seem to believe the worst is over (whether it is or not) and a weaker U.S. dollar.

As most of you know, a declining US dollar makes dollar-priced oil cheaper for foreign buyers and tends to encourage demand, leading to higher prices.

Yes, it is indeed a vicious circle.

And one damn frustrating one if you are an airline. Do you hedge or not? At what price levels? With what hedging instruments?

Remember that many airlines were still paying the price (and dearly) in the first quarter for making the wrong move on oil futures last year.

What makes this rapid rise in the price of oil potentially more troubling for the industry than the record-breaking rise last summer is that it is rearing its ugly head at a time when the level of demand, i.e., revenue, has fallen through the floor.

Posted by Holly at 12:33 PM | Permalink | Comments (0)

My thanks to a PlaneBusiness Banter subscriber who sent along a link to a series of videos on YouTube this morning. The videos are of a recent speech that was given by Anne Korin and covered on C-Span. Korin is the co-director of the Institute of Global Security. There are seven videos that cover the speech and questions and answers after the presentation.

Her speech takes a very logical and rational look at the situation we now find ourselves in -- in terms of that strategic and fungible commodity -- oil.

Excellent presentation, and I would recommend it to all who make a living in the transportation business.

Posted by Holly at 12:52 PM | Permalink | Comments (0)

It's Friday and Wall Street is up to its volatile tricks again today. Should be interesting to see where the numbers end at the close of the day.

Meanwhile, Continental Airlines and Southwest Airlines reported their third quarter earnings Thursday.

The Cliff Notes version of the results?

The numbers for both airlines -- on their face -- were very weird. Just as we saw yesterday with American and Delta. Weird in that with capacity being pulled out and oil prices through the roof for much of the third quarter, we again saw cost per ASM figures solidly in the double-digit category for both airlines.

But revenues were also up -- especially at Southwest.

Continental reported a loss of $236 million or $2.14 a share. Excluding $91 million of previously announced special items, Continental recorded a net loss of $145 million or $1.32 a share.

Southwest's numbers are a bit more complicated to break down -- as a result of the airline's fuel hedges.

Southwest reported net income excluding special items and SFAS 133 unrealized gains and losses of $69 million. Or $0.09 a share. This was two cents better than analyst consensus.

However, because of the drop in the value of crude oil, the airline had to write down the value of its fuel hedging transactions. (That is the bulk of that "SFAS 133 unrealized gains and losses" accounting mumbo jumbo up there.)

When you factor in those write-downs, the airline lost $120 million for the quarter, or $0.16.

That's right. All those great fuel hedges the airline has stocked up on aren't so great when the price of oil begins to plummet.

As for honest-to-gosh cash in the bank? The airline ended the quarter with $1.5 billion. With an incremental $200 million of a revolving credit line still available.

Four fully detailed reports on the earnings results from American, Continental, Southwest, and Delta Air Lines will be included in this week's PlaneBusiness Banter.

Posted by Holly at 11:38 AM | Permalink | Comments (0)

It's official.

The Dow Jones Industrial Average posted its worst week in history this week.

The average had its worst week on record in both point and percentage terms, as did the Standard & Poor's 500 index.

The Dow Jones Industrial Average, after starting the day down more than 700 points, finished down only 128 points, but it was one wild road in between.

Over the last eight days, the Dow has lost just under 2400 points.

As for airline stocks, it was also a volatile mix today as several airlines stocks posted record-breaking one-day gains. But we had some losers in the bunch as well.

On the huge plus side for the day, shares of Republic Holdings picked up a whopping 29% today. Yes, you read that correctly. Shares here closed at 8.94.

But wait -- we had one airline stock do even better. Shares of Alaska Air Group shot up 31% on the day, closing at 18.80.

Shares of US Airways also had a great day, as shares here were up 27%, closing at 4.60.

AMR, parent of American Airlines saw their shares pick up 20%, closing at 8 bucks even.

AirTran also had a good day, as shares here picked up a nice 18%, closing at 1.96.

Shares of SkyWest didn't have a bad day either, as shares here shot up 17%, closing at 13.75.

On the loser side, we really just had a small handful of notable drops for the day.

Shares of Pinnacle were down 10%, closing at 2.37, while shares of Mesa dropped back 15%, closing at 25 cents.

Embraer and Bombardier didn't have good days either -- not surprising considering the action in the market as a whole. Embraer shares closed down 8%, ending the week at 17.20, while shares of Bombardier closed down 16%, ending the week at 3.50.

And, last, but by no means least -- where did crude and jet fuel end up today?

Crude futures closed at 77.70, down 8.89 on the day, while the average spot price for jet fuel closed at 2.33, down 21 cents on the day.

Taken by itself, this would be great news for the things with wings.

Unfortunately, there is that elephant that is blocking the view to the nice new HD flatscreen -- the rest of the financial/economic mess on a worldwide basis and the recognition, finally, that no, this is not just a little "subprime" mortgage problem centered in California, Arizona and Florida.

Posted by Holly at 4:13 PM | Permalink | Comments (0)

It's Friday and it's already been another rough day in the financial markets.

You guys are smart folks. You knew this was going to be the case.

The Dow Jones Industrials are now down another 275 points or so, after a sharp drop of almost 700 points at the open.

Okay, enough of the bad news.

Yesterday analysts Jamie Baker and Mark Streeter with JP Morgan issued a research note in which they wrote, "We’ve never witnessed such a disconnect between fundamentals & equities. True, AMR & CAL treaded water for a month after DAL & NWA filed, despite Ch11 plans to cut capacity by an amount sufficient to restore industry profitability. But nothing we’ve experienced comes close to explaining a recent $5 share price for United, considering we expect it to earn something similar (untaxed) in 2009."

As I talked about in PBB this week, with the price of oil dropping like a rock, there is no logical reason for the corresponding battering of airline stocks.

And yes today, the price of oil continues to drop like a rock. As of this posting, the price of crude is trading at around $80 bucks and change. Yes, $80.

And no, this is no mystery. If the world is heading into a recession, the price of oil has to come down. It's simple economics. No voodoo speculative manipulation involved in this drop whatsoever.

In Jamie and Mark's note, they also said, "Sure, oil could ruin the forecast – We readily admit that unprecedented demand declines coupled with $140 oil would support multiple bankruptcies. But it is difficult for us to reconcile the implied global economic backdrop of this scenario with sharply higher oil. Always a risk, but a poor base-case assumption, in our view."

They continued, "Simply put, we are having a tough time modeling losses – Fundamentals appear to be going one way, equities the polar opposite. Perhaps seasonality comes to the rescue, perhaps the flight to quality eases and redemptions moderate, or perhaps investors simply need more time to accept the profit implications of an industry rolled back to its 1998 size while enjoying fuel prices below those of last year. In any event, our conviction in 2009 profitability and bullishness for legacy equities has yet to waver and exceeds that of any prior point in our career."

I agree.

Then again, with what is going on with Wall Street right now, maybe the thought of airline stocks being a potentially screaming "buy" opportunity is the least of what is top of mind of most investors right now.

Posted by Holly at 10:07 AM | Permalink | Comments (0)

In case you've been occupied with feeding the cat, doing Sudoku, or eating a late lunch, the world financial markets are one big mess today.

So much for the power of politicians in Washington to snap their fingers and hope that the rest of the world simply agrees to sit back and let Treasury Secretary Hank Paulson do his "magic." A couple of problems with that $700 billion gift from the U.S. taxpayers that Congress okayed last week. One, it's going to take weeks before any of that buy-back of crappy debt even begins. Two, credit markets are frozen NOW. Third, now world markets are starting to unravel.

Which brings us to the big news if you are an airline investor, or someone who simply owns shares of your own airline that you work for.

Not only are world financial markets one big mess today -- but airlines stocks are getting hit very hard.

You'd think that with the price of oil now down below $90 today that investors would be snapping up airline shares right and left.

After all -- think of the potentially lethal profit cocktail we have going on -- sharply lower fuel costs on their way, coupled with sharply reduced capacity. It would seem like the perfect recipe for higher airline stock prices.

Unfortunately that is not how the market is thinking today. Then again, the market is not thinking very clearly about much of anything. This is definitely one of those days when fear rules.

As for the airline sector, the biggest decliners as of this posting include: United, which is down 18% at 6.68, Continental Airlines, down 20% to 12.15, Republic Holdings down 16% to 7.86, AMR, parent of American Airlines, down 18% to 7.65, and US Airways, down 14% to 5.58.

Posted by Holly at 1:03 PM | Permalink | Comments (0)

Back at the WHQ today. More from me later today. But first -- as they say in TV land -- an update on something I wrote earlier this week in regard to US Airways. In my post the other day about how quiet the flights were -- sans the usual drink service -- I alluded to the fact that perhaps the airline was also saving some money in terms of not having to provision as many soft drinks, etc. on board.

The airline continues to stock just as much, in terms of provisions, as it did before. I heard this first from one of the flight attendants on my flight yesterday and a quick check with the folks in Tempe today confirmed that yes, this was the case.

So the airline is not really saving any money, in terms of any weight issues onboard. And no -- there is no danger of passengers being without ample refreshment should a long delay occur.

Where the airline is saving money is in the fact that fewer people are drinking soft drinks, which, obviously, means that in the big scheme of things the bill from Coca-Cola or whomever is lower than it would be normally.

Then there is the actual revenue the airline is making from charging for drinks.

Another point -- several readers wrote me the last two days and asked more or less the same question. "Does this mean I think all airlines should do this? Have I lost my mind?" Or words to that effect.

No.

As I said in my speech at TheBeat Live Conference on Tuesday, we are in the middle of an extremely creative time for the airlines right now. The question is -- given an airline's brand and the level of service it wants to provide -- against its current revenue and cost structure -- what is an airline going to do in terms of ancillary revenues?

In the case of US Airways -- the airline has continued to push to be more of a low cost carrier since America West merged with US Airways. In effect the airline really has no definable "brand" right now. So for them, I don't think it is that big of a problem.

But -- would I recommend that Continental Airlines do it? No. Never. It would be a total 180 degree turn to the airline's continued attempt to stress a particular level of passenger service.

And I doubt Continental Airlines will do it. They may do some other things. But they are not going to charge for Cokes.

Just how to tweak an existing airline brand right now is a huge question -- given the revenue and cost scenarios. But I don't see this as a negative. I see it as a very opportunistic time for the industry. Or at least for those who are willing to break the old mold of "well if airline A is doing it, we must all have to do it."

I just don't think that holds anymore. Some things are going to work well for some airlines. But they are not going to work for all airlines in the same manner. Yes -- those "marketing" people at airlines may just have to start earning their stripes. Instead of simply thinking about what routes to add next week.

Posted by Holly at 2:22 PM | Permalink | Comments (0)

Getting ready to make my way back to the WHQ today so just a quick note.

I see that late on Monday the Air Transport Association issued a press release in which President James May exclaimed, "The market's extreme volatility suggests that speculators, who withdrew tens of billions of dollars from the commodities markets when Congress threatened to tighten oversight of excessive and harmful speculation, breathed a sigh of relief last week when action in the Senate seemed unlikely and returned to the energy markets in full force. Well, speculators are back and prices are up."

Not hardly Jim.

Oil futures contracts for October expired on Monday. The price climbed on Monday because those who had taken short positions had to cover their rears. This was made clear yesterday when the price went back down -- ending at $107 and change.

Putting out press releases in which it is clear you don't know what you are talking about doesn't help build confidence in your credibility. I'd suggest the ATA consult with a professional next time before spouting out nonsense.

Posted by Holly at 9:58 AM | Permalink | Comments (0)

One last datapoint before yours truly hits the sack.

For you history buffs out there, you need to mark down this date in history. Because today the price of oil gained more than $16 a barrel. This was the biggest one-day gain in dollar terms since 1984 -- when crude futures began trading on the New York Mercantile Exchange.

Crude for October delivery rose $16.37, or 15.7%, to close at $120.92 a barrel on the New York Mercantile Exchange.

MarketWatch reports that the gain surpassed the previous price-gain record of $10.75, registered on June 6 of this year. The highest percentage rise in a single day was seen on Jan.3, 1994, at 20.9%, according to FactSet.

So how did jet fuel fare today? NY Harbor Jet was up 17 cents to 3.34/gallon while Gulf Coast was up 7 cents to 3.35 gallon.

Posted by Holly at 10:36 PM | Permalink | Comments (0)

Monday morning I thought we had lost another airline analyst as Lehman Brothers filed for bankruptcy. And not just any airline analyst -- Gary Chase. Gary, who is a former Institutional Investor "Star" analyst and Dave Fintzen, his trusty associate, had packed up their belongings and were waiting their turn to run the gauntlet of news hounds outside the doors of their employer the last time we heard from them.

But as Scarlett said, "Tomorrow is another day."

Today, a deal in which Barclay's bank will take over the more profitable chunks of the bankrupt investment bank was revealed, and voila! It looks like there was no need for Gary and Dave to pack up their belongings in banker's boxes after all.

According to a note from Gary this morning,

"The last few days have been a roller coaster ride (not the fun kind). We knew things were fluid, but we didn't think they'd be this fluid. As late as yesterday in the afternoon, we really thought that twelve years and, more importantly, that the collective efforts of a group of people we had tremendous pride in had come to an abrupt end. Today, we're very excited to be back in business with Barclays behind us.

We very much appreciate all the support and concern many of you expressed. It made a very difficult situation easier to take and we can't thank you enough."

Meanwhile, today Wall Street had a lot to digest. The biggest piece of news was, of course, the fact that the Federal Government -- yes, that means you and me -- has loaned mega-insurance behemoth AIG $85 billion in an attempt to give the company some time to get its affairs in order.

As I wrote this weekend in PBB, one of the things the company will probably try to do is divest itself of a number of its subsidiaries, and one of those companies is airline leasing giant ILFC.

The problem with this is that it's going to have to be one heck of a huge company.

One of the reasons that ILFC thrived as a part of AIG is that the company could lean on AIG's massive financial clout in getting much better than market rates on financing deals.

This is the same business model that GECAS uses -- as it depends on Daddy General Electric to serve basically the same purpose.

But those days are now gone. Today, the financial arm of GE is the part of the company that is dragging the rest of the company down, and in the case of AIG, the company is now being forced to look at its assets from a "what ones can we extract the most premium from" perspective.

And clearly ILFC is one of those potential jewels in the sell-off bag.

Posted by Holly at 4:27 PM | Permalink | Comments (0)

While we wait for Gustav to make landfall, and hope that Holly's family remains safe and sound, we also need to consider the impact of the hurricane on the oil and energy industry. This graphic from NOAA reminds us of the sheer number of energy-drilling platforms, most now evacuated, situated in the northern Gulf of Mexico -- almost 4,000 active platforms. What we don't see here is the shore-based infrastructure. Pipelines, terminals, and refineries along the coast are going to be hit as well.

We don't know how bad it's going to be yet, but there's likely to be a hit at the gas pump for drivers and airlines alike nationwide in the coming days.

Another note as the hurricane approaches, Louis Armstrong International Airport in New Orleans discontinued flight operations at 6:00 PM Central time. Following some of the discussion over at Airliners.net, many airlines ran extra flights and used larger planes to assist in evacuations. AirTran, American, Continental, Delta, Northwest, Sun Country, US Airways, and other airlines all contributed to the flight exodus efforts.

Posted by Jonathan at 8:56 PM | Permalink | Comments (0)

In the wee hours of this morning, analysts Jamie Baker and Mark Streeter of JP Morgan issued a huge upgrade of the airline sector. Not only were airline stocks upgraded, but the investment bank also upped its recommendation on airline credit.

From their research note this morning:

"We do not believe equities (or credit for that matter) have sufficiently responded to sharply lower fuel prices and resulting likelihood of profit resumption in 2009. Given the combination of improved non-fuel fundamentals, bolstered liquidity for many, and equity values meaningfully below March levels, we are significantly revising our estimates and equity/credit ratings for North American airlines."

The two then went on to explain:

"This Isn’t Just An Oil Call – Jet kero prices have plummeted over $1/gallon from recent highs, representing $13 billion of reduced annualized expense. This represents both the most rapid and most significant expense savings ever realized for the airlines, standing well in excess of any historic precedent for demand weakness.

The Industry Has Also Changed – This isn’t the same industry that gave us pause last March. Annualized system capacity cuts have reached 8%, liquidity defenses have been bolstered for many, other revenue trends (bag fees, etc) are surging, one merger appears set to close . . . and the sell side largely has settled into a period of uncharacteristic bearishness.

Best Yet, Equities Are Down – Sure, equities haven’t ignored oil’s descent. But many Legacy equities are still well below their March levels despite the aforementioned fundamental changes. Continental is 22% lower, Delta 23% lower, United 54% lower, to name a few."

On the balance sheet side of the equation, Baker and Streeter also re-ranked the capital structure ranking. Yee haw.

So if you are about to run out and purchase airline stocks, which stocks do the JP Morgan Dynamic Duo suggest you take a strong look at?

No surprises here.

Baker and Streeter said in their note that the legacy carriers they cover are all now "overweight," they are "neutral" on the "discounters," and "underweight" on the regionals.

With a few exceptions.

"LUV downgraded from N to UW, having outperformed as fuel made its ascent. PNCL maintained as an OW and RJET as N. AMR, CAL, and LCC upgraded from UW to OW; DAL and ALK from N to OW; NWA from UW to N. AAI and UAUA maintained at OW, JBLU at N."

Traders are standing by now to take those buy orders.

Posted by Holly at 10:58 AM | Permalink | Comments (0)

The week ended on a great note for airline stocks.

The price of oil took another drop today, closing at 115.20, down almost $5 today alone.

So why is the price of oil continuing to drop?

Fears that the U.S. economic slowdown is now beginning to spread around the world is one reason. That is what has more or less caused the dollar to rise and the euro to fall this week. So much so that the dollar posted what appears to be its biggest one-day gain in the last four years today.

Couple this with continuing sentiment that the recent higher prices really have dented demand to a certain extent, especially in a number of Asian markets, and well -- there you go.

For airline stocks, the screen was all green this afternoon, with only two exceptions. Shares of Air Canada were down on that airline's earnings revelations today -- and ADRs of China Eastern Airlines got smacked around a bit as the stock market in China took a big hit today on what some were calling a "Post-Olympic" wake-up call.

The biggest gainers for the airline sector today were:

US Airways. The stock here ended the day up 18%, closing at 7.96.  The stock picked up a whopping 54% for the week as it posted the biggest gain for the week of any airline stock we track here at PlaneBusiness.

Shares of United Airlines rose 16% Friday, closing at 11.13. Shares here were up 36% for the week.

Shares of Continental wrapped up the top three spots for the day, as shares here picked up 12%, ending the week up 26%  at 16.48.

Posted by Holly at 4:13 PM | Permalink | Comments (0)

Relatively speaking.

The price of New York Harbor jet fuel closed today below $4/gallon. At $3.92 to be exact, down 10 cents.

Meanwhile, the price of oil was down to $129.29 at the close of trading today, down $5.31 on the day.

Another day, another day of demand questions, as more traders look at the potential of the one-two punch of a slowing economy both here and abroad, in addition to rising inflation.

One of those "good news, bad news" situations that Wall Street loves so much. The good news? Energy prices are falling. The bad news? They're falling because more and more estimates of demand worldwide are being tempered because of more problems on the economic front.

But hey, we'll take it.

Posted by Holly at 4:47 PM | Permalink | Comments (0)

Sorry to be a bit late tonight with today's oil news, but yours truly had a little trip to the dentist's office today. I won't go into the less than pleasant details. Which reminds me. I don't think I've ever gone when there were pleasant details.

But anyway, this put me back at the WWH late, and well, to be honest, I then had to slurp some soup and take some pain killers before the throbbing in my gums would stop.

Okay, can I have some pity here or what?

Speaking of pity, I pity the airline CFOs out there. It's not going to be a happy Fourth of July for them, as the price of both oil and jet fuel hit new record highs again today.

After a bit of bouncing around, oil closed today at $145.29, up $1.72 from yesterday.

On the jet fuel front, New York Harbor Jet A closed at $4.36/gallon. Yes, another record high.

I do have one bit of very good news that relates to Wall Street however.

The markets are closed tomorrow in honor of July 4th.

Woo hoo. Get the sparklers out and start the parade.

Technorati Tags: airlines, aviation fuel, jet fuel, oil prices

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

Not much to say guys.

Not only did oil move up today on less than robust inventory numbers from the U.S. Department of Energy, but when all the shouting was done and oil closed up almost $3 to $143.57, jet fuel had hit new record levels as well.

Sitting down? Well, you might want to lie down.

New York Jet A closed at $4.32/gallon today.

Probably a good idea if you just stay prone for a while before attempting to get up.

Technorati Tags: aviation fuel, jet fuel, oil prices

Posted by Holly at 3:54 PM | Permalink | Comments (0)

One of our PlaneBusiness Banter subscribers wrote this afternoon,

"AMR types had a milestone moment today (not the good type either) the stock options issued in 03 are now officially underwater! ($5 strike price).

P.S. maybe can I write the loss off on my taxes ;-)"

That's one way to look at it.

Yep. Another bad day in the airline sector today as oil closed up almost a buck, ending the day at $140.97.  This was after it shot up as high as $143 and change earlier in the day.

Once again, the airline sector took a hit today. Not as bad as some of the days we've seen of late, but of all the airline stocks we track, only two posted small gains on the day -- Ryanair which saw ADRs up 2%, closing at 29.10, and Hawaiian Airlines, which saw shares up 1%, closing at 7 bucks even.

Just a sampling of the losses posted for the day.

AMR, parent of American Airlines: down 5% to 4.85.
Alaska down 4% to 14.70
Allegiant, down 7% to 17.33
Delta down 3% to 5.53
Continental down 1% to 9.96
US Airways down 4% to 2.41
Northwest down 2% to 6.52
Southwest was essentially flat on the day, closing at 12.99
ExpressJet down another 5% to 52 cents/share
United Airlines down a whopping 12% -- ending the day at 4.60.

Technorati Tags: airline stocks, airlines, Alaska Airlines, Allegiant Airlines, Continental Airlines, Delta Air Lines, ExpressJet, Northwest Airlines, oil prices, Southwest Airlines, United Airlines

Posted by Holly at 5:38 PM | Permalink | Comments (0)

The AMEX Airline Index closed at 16.20 points Friday. But earlier in the day the index sank to 15.83 points, a new all-time low.

Technorati Tags: airline stocks, airlines, AMEX Airline Index

Posted by Holly at 3:34 PM | Permalink | Comments (0)

Another Friday. Another record breaking oil price notched in the record books.

While at one point today, oil traded as high as $142.60/barrel -- when all the excitement was over, oil closed at "only" $140.21.

I guess this is what they mean when they say, "Be thankful for small favors."

Another rotten day for most of the airline sector on Wall Street as well. For those few airline stocks that posted gains on the day, the gains were quite small.

Posted by Holly at 3:17 PM | Permalink | Comments (0)

Another day, another horrible milestone in terms of oil prices as the price of a barrel of crude shot up today more than $5 a barrel. In intraday trading the price hit $140.39, but when the markets closed here in the U.S., oil futures closed at $139.64, up a whopping $5.09 for the day.

The news comes as we hear of 8% cuts in management employees at American Airlines, in addition to flight cuts at both American Airlines and United Airlines.

And not too long after these cuts were announced, Southwest Airlines came out and said it had modified their fall schedule -- picking up a lot of the pieces that were just discarded by the legacy airline pair.

American said Wednesday that it plans to eliminate 62 flights at Chicago O'Hare: 28 departures on mainline American Airlines flights and 34 flights on American Eagle.

By November, American's presence at Chicago O'Hare will be down 13%, year over year.

The airline is also pulling back flights out of St. Louis, Dallas-Ft.Worth, and New York's LaGuardia.

American is ending service completely to Albany, N.Y.; Providence, R.I.; Harrisburg, Pa.; San Luis Obispo, Calif.; Samana, Dominican Republic; and Barranquilla, Colombia.

Meanwhile, United announced that it was ending service to Fort Lauderdale and West Palm Beach.

Today, Southwest Airlines followed-up on these announcements by announcing that it will eliminate 31 flights from its existing schedule and add 40 flights to growth markets. This will see the airline not retiring two aircraft that it had said previously it was going to retire.

Big winners in the new schedule? Denver and ....Ft. Lauderdale.

Posted by Holly at 2:57 PM | Permalink | Comments (0)

Home prices post record 15.3% drop
Stocks tank along with confidence
Consumer confidence tumbles to 16-year low
Crude rises in volatile trading

Okay.....just went to check on where oil was trading, and those were the financial headlines that hit me in the face. Kind of makes you want to get back in bed and pull up the covers.

Don't think it's going to be a good day for the airline stocks -- as oil futures were up before trading began and prices are up, as of this posting. Currently oil is up a little more than 50 cents, trading at 137.25.

Parting the red sea of losses that are stacking up already in the airline sector, ExpressJet is leading the pack. The airline's shares continue to get just hammered. Shares here are now down 13% already, trading at 88 cents. And how much was that offer that SkyWest had on the table earlier this spring for ExpressJet? Yeah. It was for a lot more than 88 cents.

By the way, lost in all the hubbub of rising oil prices, I know it is June, and we are looking at record heat across much of the country -- but just a little peek at what will begin to affect some of you just a scant three months from now.

Know where a gallon of heating oil is trading today? 3.83/gallon.

Posted by Holly at 9:47 AM | Permalink | Comments (0)

After a week in which airline stocks managed to hold their own -- shares of many airlines were beaten into the ground today, as oil picked up 1.04, closing at 136.40.

Look at some of these one-day double digit drops: Continental ended the day down 16%, closing at 11.96; Delta ended down 12%, closing at 5 bucks even; US Airways lost 19%, closing at 2.54; Northwest lost 17%, closing at 5.51; Mesa was down 14%, ending the day at 48 cents; and United Airlines lost 15%, closing at 6.09.

Horrible day on Wall Street for the things with wings.

Posted by Holly at 5:02 PM | Permalink | Comments (0)

Yet another heavy shoe hit the floor today as Midwest Airlines announced that it is grounding its entire MD-80 fleet.

The Business Journal of Milwaukee reports:

"Midwest Airlines will be grounding its entire fleet of MD-80 aircraft -- used largely for long-haul flights to the West Coast -- and lay off an undetermined number of employees as part of its planned restructuring efforts, airline spokesman Michael Brophy said Friday.

The Oak Creek airline will stop flying about a dozen of the less-efficient MD-80 planes in its effort to counter the skyrocketing cost of fuel. Brophy said the number of affected employees, which would include pilots, have yet to be determined.

The aircraft are used largely for long flights to West Coast destinations like Los Angeles, Seattle and San Francisco. Brophy said the airline has not yet determined whether it would eliminate some of those destinations or reduce the frequency of some of those flights. Midwest has the option of serving those cities with the other airplanes in its fleet, Boeing 717s, from its Kansas City hub."

Between Maddog groundings at American Airlines and Midwest, Allegiant is going to have a bevy of MD-80 beauties from which to pick their next aircraft.

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

Another bizarro day on Wall Street today for airline stocks. The price of oil declines a measly 1.88 to $134.86/barrel and the market bids up airline stocks as though we really had some kind of great news.

Meanwhile, for the week, jet fuel closed at $3.94/gallon. (New York)

Yee haw. Time to run out and celebrate.

Well, maybe not.

Posted by Holly at 4:07 PM | Permalink | Comments (1)

As of this posting nearly every airline stock we track is down on the day.

One big reason -- the price of crude is on the march again.

As of this writing, the price of crude is up more than $6/barrel, hovering around $137.60.

The main mover today is inventory news.

The Energy Information Administration reported today that crude supplies fell by 4.6 million barrels last week. Analysts were looking for a drop of only 1.4 million barrels, according to according to a poll by energy research firm Platts.

Related problem number two -- the dollar was trading down today as well.

Posted by Holly at 2:04 PM | Permalink | Comments (0)

....depending on where you're buying it. West Coast still seems to be the most expensive, with West Coast jet fuel apparently closing Friday at $4.14/gallon. Other markets are running $4.04-$4.08/gallon.

Posted by Holly at 3:23 PM | Permalink | Comments (0)

Ah, I'm not sure you want to look at the price of oil. Much less jet fuel.

But, I guess, alas, there is no choice.

After oil futures posted their biggest one-day surge in history yesterday -- $5.49 -- oil prices closed up almost $11 Friday, ending trading at $138.75/barrel after European Central Bank President Jean-Claude Trichet suggested the bank could raise interest rates. This news caused the  euro to climb against the dollar.

As all good readers of PlaneBuzz know, when interest rates rise in Europe, or fall in the U.S., the dollar tends to fall against the euro. The falling dollar then also makes oil that much cheaper for buyers everywhere except the U.S.

The current record high of $135.09 was hit on May 22.

Prices were also pushed today by comments made by analyst Ole Slorer of Morgan Stanley, who wrote in a note that he expects a "short-term spike" in oil prices -- the result of rising demands in Asia.

I'll be back in a bit with an update on jet fuel prices.

Posted by Holly at 2:13 PM | Permalink | Comments (0)

Just when you thought it was safe to sign that contract for the Gulfstream....

Crude oil futures took off today, closing up more than $5, to $127.79. Jet fuel followed crude's lead, as New York Jet picked up 12 cents on the day to close at $3.77/gallon. Gulf Coast Jet was up 14 cents, closing at $3.78/gallon.

Posted by Holly at 3:30 PM | Permalink | Comments (0)

It's about time.

Then again, there is no telling how long the lull will last.

We have had a slew of conflicting influences this week on the oil markets.

But when everything was put in the Vitamix today, and swirled around, the markets decided that perhaps oil has finally reached a point where lessening demand is starting to have an effect.

The price of crude closed down $4.41 today, ending at 126.62.

Woo hoo.

Where are those sparklers and the Twinkies?

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

Hi guys. I know. I've been absent for a couple of days. And look what happens when I go off and leave you on your own.

First, the US Airways/United deal appears to be floundering, or at least that is what the New York Times reported late yesterday. Although for those of us who read such reports carefully, if I was a betting woman, it would appear that there were some union "sources" talking to Ms. Maynard and Mr. Sorkin because of that one telltale line in the story.

The line? "In particular, it became clear that the labor agreements would have to be sorted out before the combined airline could see any of the savings from the deal, which could have been in the hundreds of millions of dollars."

My translation of this is that union leaders wanted a seat at the table - before negotiations could go any further. And having listened to US Airways' Chairman and CEO Doug Parker talk this spring about how he did not think giving labor a mandate to sort out their differences ahead of time was such a hot idea (aka Northwest and Delta) -- I doubt that US Airways would agree to give labor that kind of position in a potential deal up front.

If the deal is indeed dead, this certainly puts Mr. Tilton and United in a strange position. After putting themselves on the block openly for years -- this will be the second deal to fall through involving the airline in less than two months. So much for the great deal hunter.

I wish management at United would figure out that it's more important to actually run a good airline, as opposed to constantly running numbers on various merger scenarios.

Alas, now it looks like the airline is rather inept at both.

Meanwhile, Airbus warned earlier this week about additional problems with its manufacturing process, and American Airlines has been announcing cuts in routes right and left -- including JFK/Stansted.

American said Tuesday it is discontinuing flights between Chicago and Buenos Aires, as well as its Boston to San Diego route. It will also reduce its flights from Chicago to Honolulu to only  "peak demand days." The airline is also restructuring its operations in San Juan, Puerto Rico.

Today the airline announced it is cutting service between New York's John F. Kennedy International Airport and London's Stansted Airport effective July 2.

As one of our industry buddies wrote today, "I'm shocked. Simply shocked."

Wise guy. Yeah, right.

No one should be shocked at this news, as American added this flight less than a year ago in response to competitive service on the route by EOS. EOS is now gone, so bye bye American.

Anyone taking bets as to when American finally shuts down its money-losing Love Field adventure?

But hope springs eternal at JetBlue, which this week not only announced it was delaying a slew of new aircraft deliveries -- 21 aircraft for as long as five years -- the airline also issued a prospectus on a $160 million bond offering.

Gotta hand it to them -- it's probably better to do an offering now than later this summer. Stock up those cash assets while you can.

Finally, while there were a lot of headlines yesterday talking about "lower" energy prices, remember that term is soooo relative. Prices yesterday were not that much lower. Not only that, but today, prices were back up again.

Crude oil closed at $131.03/barrel today, up almost 2% on the day, while N.Y jet fuel closed at $3.96/gallon. West Coast jet fuel is still running above $4/gallon.

Ticker: (Nasdaq:UAUA); (NYSE:LCC); (NYSE:AMR), (Nasdaq: JBLU)

Technorati Tags: airline CEOs, airline mergers, airlines, American Airlines, jet fuel, jetBlue, United Airlines, US Airways

Posted by Holly at 5:37 PM | Permalink | Comments (0)

Bloomberg reports this morning that trading in shares of Silverjet have been suspended in London because the airline has yet to receive a promised $5 million investment.

The airline said today in a statement that it had asked for the money as part of a loan agreement from Viceroy Holdings LLC, a U.A.E.-based fund. But the airline said that it has yet to receive all of the money. Shares were suspended from trading on the London Stock Exchange's Alternative Investment Market at the request of the Luton, England-based airline.

In the statement, the airline said, "Silverjet's working-capital reserves are limited and advances under the loan facility are required as a matter of urgency,'' the carrier said. "Silverjet continues discussions with other parties, which have confirmed an interest in investing in the company.''

Uh-huh.

Technorati Tags: airline stocks, airlines, Silverjet

Posted by Holly at 12:40 PM | Permalink | Comments (0)

Or would that be a "smudge"?

We got a small bit of relief on the energy price front today, but not much.

Crude closed at 130.81 for the day, but jet fuel prices pretty much stayed the same, with the average closing price for New York Jet, Gulf Coast Jet, Mid-Continent, and West Coast Jet coming in at $4.09/gallon.

For the day, shares of ExpressJet posted the biggest loss for the day, as they dropped back a whopping 41%, closing at 1.61. Another day of decline for the airline -- after it said Wednesday it was cutting its branded flights by 30%.

Shares of Mesa Air Group didn't have a good day either, as the airline was forced to talk about its dwindling cash situation and potential revenue shortfall as a result of the loss of the Delta Air Lines/Freedom Air contract today in SEC filings. Shares here dropped back 16%, closing at 48 cents after the airline's discussion of a potential bankruptcy filling. With the equity in this stock already shot for the most part, one has to wonder why the airline has not already filed for bankruptcy protection.

Republic didn't have a good day either, as shares here were down 12%, ending the day at 12.45.

SkyWest was the one regional that pretty much held down the fort, as shares here were only down 1% on the day, closing at 15.48.

As for big Wednesday loser AMR, parent of American Airlines, the stock posted a small recovery today -- but nothing to write home about. The shares recovered 5%, closing the day at 6.56, after its 24% jump off the cliff on Wednesday.

Things didn't get much better for airline stocks after hours as S&P put the ratings of nine U.S. airlines on CreditWatch negative.

"The dramatic increase in jet fuel prices has increased airline costs significantly over the past two months, and, if sustained, could threaten their liquidity and financial profiles," said Standard & Poor's credit analyst Philip Baggaley in a statement.

S&P placed the following airlines on CreditWatch: AirTran Holdings Inc.; Alaska Air Group Inc., the parent of Alaska Airlines: AMR Corp., parent of American Airlines; Continental Airlines Inc.; JetBlue Airways Corp.; Southwest Airlines Co.; UAL Corp., which owns United Air Lines: and US Airways Group Inc., which owns both US Airways and America West Airlines.

Southwest Airlines, the most heavily-hedged U.S. airline, and Alaska Air Group, the second-best fuel hedged carrier, are in a "somewhat better" position than others, according to S&P.

Northwest Airlines Corp. and its Northwest Airlines unit are already on already on CreditWatch due to the proposed merger with Delta Air Lines Inc., which is currently on positive CreditWatch.

Technorati Tags: airline stocks, airlines, AirTran , Alaska Airlines, American Eagle, AMR, Continental Airlines, debt ratings, Delta Air Lines, ExpressJet, jetBlue, Northwest Airlines, regional airlines, Republic Airways, SkyWest, Southwest Airlines, United Airlines, US Airways

Posted by Holly at 8:14 PM | Permalink | Comments (0)

Herb sits down with CNBC after yesterday's annual meeting talking high oil prices, airline bankruptcies, employee productivity, and the lack of clear understanding on Capitol Hill about the problems affecting the U.S. airline industry.

Ticker: (NYSE:LUV)

Technorati Tags: airlines, Herb Kelleher, Southwest Airlines

Posted by Holly at 11:16 AM | Permalink | Comments (0)

Or so said UBS analyst Kevin Crissey in a research note today.

"The legacy airlines have grown passenger revenue 7% so far this year. Although this is a good result by historical standards during a period of weak economic growth, it is not remotely close to what’s needed (think 4x this amount). Spot gulf coast jet fuel prices are up an incredible 85% y/y. The industry needs to shrink in a huge hurry to be able to raise fares and reduce fuel burn and other expenses.

It is difficult to make a compelling (or even decent) case to buy any US airline stock right now. The status quo in terms of fuel prices likely results in multiple bankruptcies. We continue to have no Buy recommendations and have Sells on AMR and JBLU."

Just food for thought. This note was published this morning -- BEFORE oil picked up more than $4 on the day, setting a new all-time high of $133.17 a barrel.

Jet fuel? Another new record, and this one is a big one.

Jet fuel closed today at over $4 a gallon. $4.09 a gallon to be exact.

Posted by Holly at 7:33 PM | Permalink | Comments (0)

Oil prices bounced around a bit today, but when all the shouting was done, crude oil futures closed at 126.29, up $2.17 on the day.

Spot price for New York Jet Fuel closed at $3.88/gallon.

Posted by Holly at 4:52 PM | Permalink | Comments (0)

One of our regular readers sent us an email this morning that I thought was a great opening for a short story.

"In the morning, I wake up, turn on CNBC to check the price of oil, utter a few curse words and head to the fridge for a Diet Pepsi."

He added, after I sent him a note about his very descriptive prose, "And yes, it happened today!  I saw $126 and change and said 'F**k, here we go again!!' That oil ticker provides more of a jolt on some days than either Diet Pepsi or coffee!!"

As of this posting, crude is running at about $126.65, up 2.53 on the day, but off the $127.40 mark it hit earlier in the day.

The price of oil: our industry's contradictory equivalent of Jolt. Twice the caffeine, providing twice the incentive to just go back to bed.

Posted by Holly at 12:10 PM | Permalink | Comments (0)

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 coast of Newfoundland.

Technorati Tags: airline, oil prices

Posted by Holly at 10:24 AM | Permalink | Comments (0)

With the price of oil taking off today, most airline stocks went in the opposite direction.

With two big exceptions.

On the back of the news that Midwest Airlines will begin "discussions" with AirTran, as well as other "strategic and financial parties" that have expressed interest in a deal with Midwest -- shares of Midwest were trading up almost 13% as we posted this update, to 14.18.

Across the pond, Ryanair also saw shares up sharply today, as ADRs of the airline were trading up almost 14%, sitting at around $41.75 last time I checked.

The reason? The airline reported earnings up 20% from last year's fiscal first quarter.

Tickers: AMEX:MEH, Nasdaq:RYAAY

Technorati Tags: airline earnings, airline stocks, Midwest Airlines, airlines, Ryanair

Posted by Holly at 2:25 PM | Permalink | Comments (0)

Big day for oil today as the price of a barrel of crude oil closed up $1.40 today, closing at 78.23.

Yep. More than $78 a barrel.

Posted by Holly at 2:11 PM | Permalink | Comments (0)

For those with enquiring minds -- or SUVs -- crude oil futures closed at $75.92 today.

Wheeeeeeeeee.

Posted by Holly at 6:24 PM | Permalink | Comments (0)

Crude closed up more than a buck today, ending the day at 75.05/barrel after the DOE reported a drop in the crude oil inventory numbers for the week ending July 13.

Oh, and gasoline and distillate supplies were down too.

Jet fuel, that hot commodity that this industry is most concerned with is, of course, a distillate.

Posted by Holly at 4:27 PM | Permalink | Comments (0)

Last time I checked the price of a barrel of crude oil -- it was not a pretty sight.

$72.90, up almost a buck over yesterday's close. Futures traded as high as 73.10 today.

Not a good day for the dollar either, with the euro hitting a new high of 1.37.

The reason for the rising price of oil is a report that came out Monday from the International Energy Agency. The agency forecast that  world oil demand is now expected to rise faster than previously expected over the next five years while production declines.

With oil prices rising on this cheery news, it's not surprising that today has not been a good day for airline stocks. As of this posting, shares of US Airways are down almost 6% on the day, while shares of Continental are now down almost 4%, ditto for shares of AMR.

The reason for the sinking dollar is increasing concerns over an issue we've been beating the drum over for more than four years in our weekly Market Review in PBB -- yes, that mortgage fantasy bubble that has now broken in a big way. Debt rating agency Standard & Poor's said Tuesday that it might downgrade $12 billion of residential mortgage-backed securities, or RMBS. S&P also said it is changing the way it evaluates subprime RMBS, partly because of unprecedented levels of misrepresentation and fraud, combined with potentially shoddy loan data.

Nice.

Obviously, given this news, foreign investors have decided that maybe euros are the place to park money now -- not the dollar.

Posted by Holly at 2:05 PM | Permalink | Comments (0)

Oil hit more than $70 a barrel today in trading, but as of my last check, it looks like it is going to close the day just under the psychologically important number. Last time I looked it was at $69.57.

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

Oil prices were up again today as fears of the effect of a Nigerian strike against oil producers caused traders to come down with a case of the nervous jitters. Oil was up almost 50 cents on the day, closing at 69.14 a barrel.

Word to the wise. Don't get used to those lower prices at the gas station. They aren't going to stay there for much longer with oil moving up as it has been for the last two weeks. Remember -- there is usually a lag time between rising oil prices and higher gasoline prices.

Posted by Holly at 4:38 PM | Permalink | Comments (0)

Just an FYI.

As bad as that number is, as PBB subscribers will see in this week's issue, the problem is not so much the price of crude, it's the price of jet fuel. We have a huge gap between the price of jet fuel and crude this week.

Posted by Holly at 9:43 PM | Permalink | Comments (0)

Not a good day today on Wall Street for airline stocks. As usual, the bogeyman is oil. With oil futures climbing as much as 2% this morning, airline stocks have felt the pain.

As I write this, the price of a barrel of crude is running at $62.65 --down a bit from a morning-high of 63.25.

This run-up appears to be a continued to reaction to energy inventory levels which were reported Wednesday by the DOE. Those numbers showed gasoline inventories down -- again. Not what traders wanted to hear.

Posted by Holly at 10:39 AM | Permalink | Comments (0)

While Iran decided to release the 15 British soldiers they had taken into custody today -- the price of oil did not drop back as much as some might have liked.

The escalating tensions surrounding this incident had been cited as one of the main reasons the price of oil had continued to pick up ground last week.

The price of a barrel of crude closed today at 64.38 -- down only 26 cents.

Last time I filled up a tank of gas in Phoenix before I returned Monday to the Worldwide Headquarters? It was $3.17 a gallon. (Yes, unfortunately it was premium.)

Then again, the news concerning the British sailors did come in late today. We'll see what happens tomorrow.

Posted by Holly at 7:41 PM | Permalink | Comments (0)

Well, I'd like to say I have good news and bad news, but I don't think I have any good news.

Oil prices have flown through the roof this morning. As we post this, a barrel of crude is now trading at 66.25, up over $2 since yesterday.

Reason? Escalating tensions about goings-on or potential goings-on in the Middle East.

Posted by Holly at 2:16 PM | Permalink | Comments (0)

CNN reports that U.S. crude oil futures briefly spiked over $5 a barrel in electronic trading late Tuesday on rumors that Iran had fired on U.S. Navy warships.

Crude gave up most of those gains according to one trader after reports of a confrontation were denied.

U.S. light crude for May delivery jumped $5.18, or about 8%, to $68.91 a barrel in electronic trading before giving back most of those gains to trade at $64.40 a barrel, $1.47 above Tuesday's settle price on the New York Mercantile Exchange.

"We have no information at this time that an incident has taken place in the Gulf," Gordon Johndroe, a spokesman for the National Security Council, said about reports of a confrontation between Iran and U.S. Navy warships.

Posted by Holly at 9:51 PM | Permalink | Comments (0)

"Surprises never cease in this economy. If one was to look at energy demands, it certainly would not lead to a conclusion we are entering a recession."

— John Person, NationalFutures.com

Amen.

Today the Department of Energy issued its latest energy inventory figures. As regular readers of PlaneBusiness Banter know, we track these numbers every week -- because of their implications to jet fuel prices.

Today, the government reported that for the week ending Mar. 2, crude oil inventories were down for the first time in three weeks. Both distillate inventories (which include jet fuel) and gasoline inventories had already been posting steady weekly declines prior to this week's latest update.

The upshot? Crude oil prices have jumped today. Last time I checked, a barrel of crude was trading up over a buck and change at $61.70/barrel.

Posted by Holly at 11:48 AM | Permalink | Comments (0)

Thanks to our Brown Bag Analyst here at PlaneBusiness, who was paying more attention to news today than I was, being tied to the keyboard as I have been for much of the day.

Apparently Occidental Petroleum Corp. said today it would be unable to meet commitments to its customers after a fire led to the shutdown of most production from its Elk Hills field in California. Elk Hills is California's largest gas field. 60% of the field's output is crude oil.

Bloomberg reports that there is no timeframe for resuming production at the field, which normally has an output of 120,000 barrels of oil equivalent a day, said Occidental spokeswoman Susie Geiger. About 95% of output is shut down. Occidental spokeswoman Jan Sieving confirmed in an interview that the company declared force majeure.

Yep. I'd say that was the biggest reason for the jump.

Posted by Holly at 5:14 PM | Permalink | Comments (0)

It's going bye-bye.

Today the price of crude closed at $59.71, up a hefty two bucks a barrel.

Why all the excitement? Good question, especially after the price of crude fell 2% on Wednesday.

Couple of reasons. Continued bitter cold in the northern U.S. with predictions of more to come, along with a little good-old-fashioned short covering session on Wall Street. Oh, and yes, the DOE reported that stocks of distillates (which includes the precious jet fuel) and crude both declined for the week, ending Fri. Feb. 2 yesterday.

Guess it took a day for that news to sink in.

Look for continued volatility here before we start to see a trend that sticks.

Posted by Holly at 4:17 PM | Permalink | Comments (0)

Okay, enough about pigskin playoffs.

We said last week we wanted to know more about the reason American removed a portion of its available inventory from Expedia.

It appears we now have an answer. Kind of, sort of. If you dig through the reasons given by both sides, I think it comes down to one thing -- the airlines are going to let the third party sites continue to sell the bottom bucket fares, but they want the chance to directly interact with their higher fare customers. Hence -- it would appear that American is just the first in what will probably become a much longer line.

According to The Beat newsletter Friday,

"Expedia's decision to "cease processing American Airlines bookings using the Worldspan global distribution system" is what led to the termination of domestic premium class and international fare processing on AA by Expedia as of Monday Jan. 8, according to an Expedia.com spokesperson.


"AA has made additional statements in the press that refer to negotiations between Expedia and AA," the official wrote in an email. "Expedia made this decision independent of any negotiation issues with AA. We do not see the need to comment further at this time."

The IAG blog noted today,

"Bottom line? Airlines are continuing to take back their product distribution. Last wee we wrote about how Alaska Airlines is thrilled with their own web site's success. The news from Alaska is certainly not unique. Every ticket bought through an OTA (online travel agent) incurs a fee for processing which you only see when you are about to make the purchase. This fee even shows up separately on the credit card statement. Consumers are using the online tools available to find the lowest fare and then go to the airline's web site to make the purchase and save $5 per ticket.

The Internet is the shopping place for bottom fishing, and the lowest fare buckets sell first. That is why American can safely exclude its premium products from OTA sites. We expect to see the same action with other sites (maybe even Travelocity?). Other airlines are bound to follow American's lead. The Internet disintermediates any function that becomes unnecessary. And as matters stand, airlines do better selling their premium products than OTA sites."

Ticker: AMR:NYSE

Posted by Holly at 1:48 PM | Permalink | Comments (0)

BP reported Sunday that it has had to shut down half of its Alaska North Slope production because of what the company termed, "severe corrosion" in its main Prudhoe Bay oil pipeline.

Can't argue with that decision. I'd much rather them fix the problem than have a horrible oil spill in that beautiful part of the world.

However, this shutdown to see just how bad the "corrosion" problem is does not come without an immediate side-effect -- a healthy uptick in the price of crude oil. Not only could BP not give a timetable as to how long it would take to completely shut down the pipeline Monday morning, it could not give an estimate as to how long the pipeline could be out of service, as repairs are made. The severity of the problem has not yet been determined.

As of 1 p.m. Monday, crude futures were trading at about $76.65, almost $2 above where they closed on Friday.

Oh joy.

Not a surprise, given that the shutdown will cut U.S. oil production by some 400,000 barrels a day, or about 8% of total U.S. oil production.

Reading comments that BP issued Monday morning, it doesn't sound like this is going to be a "quick-fix" deal. In fact, the company already has another pipeline down -- the result of an oil spill in March. That spill revealed corrosion, resulting in the company having to put in a bypass on that line.

As we noted in last week's PBB, the problem the last few weeks for the things with wings -- and those who have to pay the fuel bills for them -- has not been so much the price of crude as it has been an increase in the crack spread -- a situation that results in the price of jet fuel rising higher in proportion to the increase in the price of crude.

Posted by Holly at 12:09 PM | Permalink | Comments (0)

Crude closed today at $72.66.

Very strange day on Wall Street today. First, it's clear the markets think the fighting in the Middle East is going to end sooner than later. I'm not so sure. Especially since today we saw a record number of bombings on both sides.

But secondly -- that thundering herd of bulls you heard today on the Street was put into motion thanks to Fed Chairman Ben Bernanke. Big Ben told Congress today that he thinks inflation can be controlled and the economy is slowing. The market did its own translation of those remarks: NO MORE RATE HIKES -- FULL STEAM AHEAD.

That is why the Dow Jones Industrials ended the day up 212.19 points, the second highest gain this year.

As for the airline sector today -- it doesn't take much to figure out what happened here. It's called the Southwest Airlines-American Airlines Profit Dance.

Posted by Holly at 8:51 PM | Permalink | Comments (0)

While the price of crude closed in New York today at $76.60, the shouting is far from over. Forward contracts are already trading at $80 plus, and I don't think Friday is going to be a good day.

Reason? Israel's attacks on Lebanon, which came after Hezbollah forces apparently fired some 80 rockets into Israel earlier in the day.

Oh, and if you were planning on flying into Beirut tomorrow, I would suggest you contact your travel agent and make other arrangements.

Posted by Holly at 3:21 PM | Permalink | Comments (0)

Let's see. Iran says it won't abandon its right to continue its nuclear energy program, there were have been two suspected explosions at a crude oil pipeline in Nigeria, and tensions between Israel and Lebanon are escalating.

Just the cocktail for higher oil prices, and the market, as of this writing, has not disappointed.

Will be interesting to see how high oil ends today.

Posted by Holly at 9:14 AM | Permalink | Comments (0)

The price of a barrel of crude closed at $74.09 today. Yee haw.

However, while rising crude oil prices are bad enough, this has also been a bad week for jet fuel prices too, as I mentioned in this week's PBB. NY Jet closed at $2.16/gallon on Thursday, and I doubt it dropped back much today, although I have yet to check.

And no, jet fuel and crude don't always move in the same direction. Why? Because of the cost to refine jet fuel. A number of factors enter into this. The metric that is used to tell us just how expensive it is to refine a barrel of crude is called the crack spread.

As a result, sometimes the price of jet fuel dips below rising oil prices, sometimes it tracks the price of crude fairly closely. Other times -- it tracks above the price of crude.

Posted by Holly at 10:33 PM | Permalink | Comments (0)

Just goes to show what a few North Korean missiles will do.

Actually, today's record-breaking move was motivated more by gasoline supply concerns. But those geo-political factors didn't help much.

Look for gas prices to be closer to, or above, $3 a gallon by this weekend -- depending on the weekly energy inventory numbers the Department of Energy reports Thursday.

Posted by Holly at 2:40 PM | Permalink | Comments (2)