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Talking Points fr: Dispatcher Symposium

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Talking Points fr: Dispatcher Symposium

Old 10-17-2005, 03:15 PM
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Default Talking Points fr: Dispatcher Symposium

AIRLINE ECONOMICS

a.. Int'l travel will continue to grow.
b.. There is a resurgence of investors looking to invest in start-up airlines.
c.. USAIR-AMWEST received 565M from investment bankers after their merger.
d.. Only SWA has investment grade debt at this time.
e.. Delta will lower fares dramatically in the near term to protect Atlanta and pressure AIRTRAN.
f.. USAIR-AMWEST is using the barbell strategy (strong on both coasts) as their plan. UAL will do the same.
g.. JetBlue's 5 year honeymoon is over. Labor and Maintenance costs are set to zoom. To keep current profit margins, they must have a 20 growth rate, which the two economists who spoke thought was unsustainable. Aircraft leasing costs are also set to rise.
h.. AA and CO are at risk now. AA will probably file Chapter 11 in less than 2 years, CO sooner. The Chapter 11 filing by Delta and NWA will make the AA & CO filing all but unavoidable.
i.. There are ½ the number of airlines operating in 2005 as there were in 1992.
j.. UAAIR-AMWEST merger has the best chance of working because the USAIR culture has been radically changed.
k.. Down the road, look at the possibility of a JETBLUE-AIRTRAN merger.
l.. Airfares are finally making a good recovery. They are now back at the 1999 levels.
m.. The open skies agreement with India has opened a travel boom. All first and business class seats are usually sold in/out of India 300 days
before the date of travel.
n.. AA is selling a few business class seats for $4500.00 RT as a loss leader. The rest are in the 7-8K per seat range.
o. AIRBUS is funding Independence Air in the hopes of selling them more aircraft later.
p.. Only DL, USAIR & SWA have reduced operating costs in the 2nd quarter of this year.
q.. RASM & CASM are close. Variances between airlines are diminishing rapidly.
r.. SWA has the highest labor costs. USAIR has the lowest.



FUEL & RELATED ITEMS:

a.. No new refineries have been built in the USA since 1973.
b.. Current oil cracking costs are equal to the cost of oil. This means that jet fuel on the gulf coast is about $125.00 per barrel. One barrel = 42 gals.
c.. Refineries have no interest in making jet fuel because it is time/labor intensive and the profit margin on automotive gas is higher.
d.. 18% fuel economy improvement in the last 5 years for the U.S.A., mainly due to older aircraft retirement.
e.. JETBLUE has 25% of their fuel hedged, extending to 2009. The 2009 price is $46.00. The hedged price is exclusive of cracking costs. So their
real price is the hedged price plus cracking costs per gallon.
f.. N.Y. Mercantile Exchange experts expect oil to remain at least $60.00 per barrel for the next 5 years. UAL's bankruptcy plan for fuel is in the 50's.
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