Monthly Archives: November 2008

Airline Stocks Hit Turbulence: Sluggish Traffic and Higher Oil to Blame


As ardent followers of the airline stock sector are aware, every month Continental Airlines leads the other airlines in reporting their traffic numbers for the previous month. But the other information the airline issues, along with its traffic numbers, is usually of more interest to us hard core airline fans.

That information, of course, is the RASM estimate the airline issues along with the traffic numbers.

For those of you who are new to this piece of the world, RASM stands for revenue per available seat mile and it is the most widely used “rule of thumb” measure of an airline’s revenue performance.

Last night Continental Airlines reported that it now expects mainline domestic revenue per available seat mile for November 2008 to grow only 4 percent to 6 percent, down significantly from previous expectations for growth in the “low-to-mid teens.”

Not surprisingly, the airline said that this was a result of lower yields. Translation: Lower ticket prices.

This news comes after most airlines over the last month insisted during their earnings call presentations that they were not seeing significant drops in demand.

We have a bit of what we might call an “inconjunct” here.

Jamie Baker, analyst with JP Morgan wrote this morning that while the news was not a complete surprise — it was still enough to push him to sharply reduce his fourth quarter forecast for the airline.

Baker now expects the company to report a loss of $0.56 per share, compared with prior expectations for profit of $0.40.

As Baker said in his note, it wasn’t a question of if — just a question of when the economic meltdown would catch up with airline demand. He expected the industry might have at least a month or so before the full effect hit.

The other problem today? Oil prices.

And here it gets a bit more complicated.

Is the price of oil rising because of a supply and demand issue?


The reason the price of oil is up today is because the dollar is falling.

Remember that oil is priced in dollars. As a result, investors see commodities such as oil as a hedge against inflation and a weak dollar and pour money into the crude futures market when the greenback falls.

A weak dollar also makes oil less expensive to buyers dealing in other currencies.

There you go. There’s your commodity pricing/falling dollar lesson for the day. Unfortunately the end result — higher oil prices — then affects this sector negatively.

As of this posting oil has soared more than $7 today, and is now trading around $71.50.

Getting Back in the Groove: Go Vote


Hello everyone. Okay, I promise. I’m going to try and get back in the groove here this week with PlaneBuzz. My apologies again for being rather absent of late. But as I explained the other day, I’m in the middle of trying to set up a new office/home in Dallas, and well — I hate to offend you folks but — PlaneBusiness Banter subscribers will always get first dibs on my constricted time. And energy.

Speaking of — what’s that? Energy… that is.

Energy is what all of you need today as you go to vote, as it might take some time. But it is important. So go do it. Whatever it takes, however long it takes.

As for me, I voted early last week, before I left the Worldwide Headquarters.

Just do it.

PlaneBusiness Banter Posted

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I know. I know. I promised pictures.

Okay, tomorrow. I promise. Really.

Long weekend for yours truly. Another one of our longish earnings issues and it came on top of two days filled with moving activity, topped off by an all-day sojourn over at Southwest on Friday.

Boom. It’s then Saturday. Arrrrrgh.

Anyway, forgive me. LIfe just took over this last week.

However, there is good news for PlaneBusiness Banter subscribers. This week’s issue is now posted and you can read it here.

Where the Hell I’ve Been


Okay, okay. I know. Some of you have sent me emails this week wondering if I am sick or something.

No — just trying to get settled into the new not-yet-too-comfy confines of the new PlaneBusiness Branch Office in beautiful Las Colinas, Texas. (For those of you who don’t live in the DFW Metroplex, Las Colinas is just the fancy name for “North Irving.”)

But you know how it goes. There is the matter of insurance. The matter of internet connectivity. Then there is the phone. And we can’t forget the basics — like a place to sleep until something better arrives. So that means an air mattress. And then there are the things you forget about. Trash cans. Coffee maker. Trash bags. A knife and a fork. Not to mention a spoon. (Yep, fingers can do in most cases, but it just gets so messy.) Which reminds me. Paper towels.

My thanks to Kroger, TJ Maxx, Target and other fine establishments. They helped me to make my own contribution to jumpstarting the now dead economy a rousing success on Thursday.

Then — there was the matter of Halloween. More on that later today. Meanwhile I have to go get some work started on this week’s PlaneBusiness Banter. This year Holly was a celebrity judge at the Southwest Airlines’ Halloween Event. So…..that means I got no work done yesterday. None. Zilch. (Which, I would say, is about the same amount of work anyone who works at the Southwest headquarters got done as well.)

While I’ve heard stories about Halloween at Southwest for years, I had never experienced it.

It defies a simple one sentence explanation. Much less two.

Like I say, more on that later.

And……I’ll also tell you the story of the great unintended consequence of my Halloween attire that now has me sporting some rather colorful hair.

Talk to you later. Go watch some football in the meantime.