Remember the Stop Oil Speculation Now movement started by the ATA? I really wasn’t a fan of it at all.
Today Sky Talk linked to a new site launched by the Reaching Higher Coalition called The Airline Oil Spin. The site basically makes a point that the airlines’ fuel hedging is simply a form of speculation, and can’t have it both ways, which I think many have been saying ever since the ATA launched its campaign.
There was an ineresting quote I found on one of the website’s pages:
“Speculators bring information to the markets. Clearly, the supply of oil is struggling to grow, and demand is continuing. In that environment, higher prices are a result.”
Scott Topping
Treasurer of Southwest Airlines
This is actually the same quote I posted awhile back. Still ironic nontheless since Gary Kelly (CEO) signed the original letter.
Anyway, I’m glad to see a group stepping up against the ATA on this one.
Welcome to day two of “Dan loves making graphs way too much.” Today we’re going to look at revenue.
Here’s a graph comparing revenues from the second quarter of 2007 to the second quarter of 2008.
Increases are always good…but let’s look at the percent change in revenues versus the percent change in expenses. Continue reading ‘Revenue and Cost Growth (And a Talk about Baggage Fees)’
Well the majors have announced their earnings for the second quarter, and I’m going to spend the next couple of days analyzing them a little bit. Today we’ll look at costs, tomorrow will be revenues, and Wednesday will be a discussion on jet fuel prices.
First let’s compare the CASM numbers (cost per available seat mile) including fuel (but excluding special charges) from the second quarter of 2007 and 2008. (Click on any of the graphs to enlarge them) Continue reading ‘Comparing Airline Costs’
I found two stories that related to government involvement in the industry today. Northwest released its earnings report today, and mentioned how its merger with Delta requires Department of Justice approval.
Meanwhile, Continental announced that it has applied with the Department of Transportation to join the Star Alliance. Also, Continental, United, Lufthansa, and Air Canada* are also applying for antitrust immunity for transatlantic service. Some SkyTeam members already have immunity, and some of the Oneworld carriers are rying to get it as well.
All of these airlines are attempting to adequately respond to market conditions, but government approval seems to be impeding their actions, in my opinion. If I’m correct, it probably hurts the airlines financially. And some want more regulation?
*Random speculation - Isn’t it interesting US Airways isn’t on that short list?
I just found a slightly-old story from the Houston Chronicle about the ATA’s crusade against oil speculation and Southwest’s hedging:
Of all the airlines, though, Southwest could be affected the most if Congress changes the ATA’s cautious wording about related commodities.
…
Given his familiarity with commodity markets, I asked Topping [Scott Topping, Southwest's treasurer who is in charge of the hedging program] if he believes that speculators were inflating oil prices.
“That’s what I have a hard time getting my arms around,” he said. “Speculators bring information to the markets. Clearly, the supply of oil is struggling to grow, and demand is continuing. In that environment, higher prices are a result.”
That sounds like a “no” to me.
Very interesting to say the least. I always wondered why Southwest signed the letter to travelers. Industry unity (or something like that), I guess.
Time for another reader poll!
Thanks for voting in the first one. Most voters believed foreign airlines should be able to own more of United States airlines, but disagreed on how much. Some believed in a 49% limit, while others thought foreigners should be able to hold the majority. Anyways…
The past few weeks the idea of regulation has been bounced around again to try to solve the industry’s problems. On the other hand, though, some still think there is still too much regulation. For example, some may think that some of the airlines were allowed to stay in bankruptcy too long. Had they been allowed to go out of a business, we might not be having the same capacity problems we are today.
I’ve mentioned regulation before here and here. Evan Sparks has lots of good commentary on the issue on his blog.
So, what do you think? Should the industry be like it was before 1978? Well here’s poll #2…
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Feel free to vote and share your thoughts in the comments.
While reading Towers and Tarmacs yesterday I found a link to a very well-reserached article by Rick Seaney. He compared the December 2007 schedule to the December 2008 schedule and determined the change in seats. The decline for some cities is pretty drastic - and not all of the capacity cuts are loaded in yet.
My city is seeing an 11% reduction in seats. What about yours?
Apparently so, thanks to a new start-up called Sojern. The advertisements though, will only be on boarding passes printed out online, if I’m reading things correctly. The airlines, of course, don’t want to spend more on paper and ink. You can see a sample here. I will say that this is some clever targeted advertising.
I did find it interesting, though, that while passengers will see the advertisments when the check in, they will have the option of not printing them out if they wish. I wonder if to encourage it the airlines will offer a frequent flyer bonus for doing so. E-Miles already gives out miles for some programs for looking at ads, so I don’t think it’s too far of a stretch.
Delta started the new system yesterday in Vegas and will be rolling it out tomore cities. American, Continental, United, and US Airwasys will also be using the sytem in the future.
For more information, Adverstising Age has a good article.
In other news, Continental posted a loss for the second quarter. The conference call is slated for 10:30 this morning and can be found here.
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