This week we’ve now seen downgrades and dire comments from both Credit Suisse and, as of this morning, Jamie Baker with JP Morgan.

But more potentially troubling to the airline sector than the expected stock price worries, given the higher price of oil, Standard & Poors said yesterday that they were now taking a hard look at the credit ratings of all the major airlines that they track. That would be a total of ten.

Currently, three of those airlines have positive outlooks, six have stable outlooks, and one has a negative outlook.

In particular, the agency says that it is taking a hard look at its “positive” outlook ratings for AMR, Delta Air Lines and US Airways.

S&P noted that except for Southwest Airlines and Alaska Air Group, the airlines “have a relatively low proportion of their 2008 fuel needs hedged, because hedging high and volatile fuel prices is expensive and may require posting cash collateral.”

S&P also noted that while airlines have taken advantage of strong demand and raised fares to offset higher fuel prices, it expects that this trend will stall across the industry in the face of softer demand, likely first on domestic routes and then in international markets.

In addition, it pointed out that though US airlines have built up their cash and in a few cases, bank liquidity over the past years as a cushion against adverse conditions, most of them have at least part of their short-term investments in currently illiquid auction-rate securities.

The rating service says it expects to complete its review by the end of the month.

Tickers: (NYSE: LUV), (NYSE:AMR), (NYSE: DAL), (NYSE: LCC).

Technorati Tags: airlines, American Airlines, Delta Air Lines, Southwest Airlines, US Airways

Holy Moly Batman.

It’s bad enough that we have the price of oil hitting new record highs today (107.60 as I post this, up an eye-opening 2.45 on the day). The surge in oil prices has sent shares of almost all airline stocks reeling — again.

But one airline stock is really getting hammered today.

Shares of ExpressJet are now down about 17% — sitting at about 1.86 a share — after the airline reported earnings this morning.

The airline posted a loss of $31.7 million, or $0.60, compared with a profit of $22.8 million, or $0.39 cents per share, a year earlier. Its revenue rose 2.3% to $436 million from $426.4 million.

ExpressJet spent nearly $41 million last year in an effort to transition 69 aircraft that were under a previous agreement with Continental to branded flying. Continental withdrew the jets from its capacity-purchase agreement starting in December.

“Results reflect the enormous challenge this company was presented in redeploying 25 percent of its fleet within a six-month period and managing an increasingly challenging airline industry environment,” CEO Jim Ream said in a statement.

For the full year, ExpressJet posted a loss of $70.2 million, or $1.31 per share, compared with a profit of $92.6 million, or $1.56 per share, in 2006.

Yeoow.

Not surprisingly, given the airline’s increase in branded flying, the airline’s fuel costs when through the roof during the fourth quarter. Fuel cost was up 70% over fourth quarter of 2006.

Ticker: (NYSE: XJT)

Technorati Tags: airline stocks, airlines, Continental Airlines, ExpressJet

Very bad news on the fuel front today folks, as the price of a barrel of crude hit a new all-time high. Crude shot up $5 a barrel today, closing at 104.52. In a somewhat ominous sign for tomorrow, after-hours trading has oil now trading at a price of 104.95.

The uptick comes after the government reported a larger than expected decline in the inventory levels of crude, and OPEC said publicly that it has no plans to change its current production levels. Oh, and yes, the dollar also hit new all-time lows against the euro.

Take it all together and you’ve get the perfect recipe for higher oil prices.

The Energy Information Agency said today that crude inventories fell for the first week in eight, dropping 3.1 million barrels to stand at 305.4 million barrels for  the week ending Feb. 29. Analysts surveyed by commodities information provider Platts had been expecting an increase of 2.1 million barrels for the week.

And if you are wondering about gasoline, the news was not good here either, as April reformulated gasoline gained 11.3 cents to $2.6421 a gallon and April heating oil rallied 15.13 cents to $2.9431 a gallon on Tuesday, the highest closing level a front-month contract has ever seen.

Yep. $3 a gallon for heating oil.

Delta/Northwest Pilots “Talking”

A number of news organizations are reporting today that pilots leaders from both airlines are meeting today in an effort to come to some kind of seniority agreement for the two pilot groups.



Mary Schlangenstein and Mary Jane Credeur reported today in Bloomberg that the sessions, which started yesterday, are the first between the airlines’ work groups since negotiators failed to agree two weeks ago on how to combine the seniority rankings of 12,000 pilots.

This week’s meetings involve “leaders of the pilot groups at the two carriers and don’t yet involve the full merger committees for each union chapter,” according to sources cited in the story.