Airline Finance News - North America

AirGuide Business, Jan 7, 2008

Jan 7, 2008

Air service subsidies raise debate. Subsidized air service often comes at a big cost to taxpayers, the USA TODAY editorial board writes. The board notes that some communities in remote areas need subsidies, but others that receive subsidies are not far from large airports. However, Rep. James Oberstar, D-Minn., and Rep. Jerry Costello, D-Ill., support subsidies and say they are vital to maintaining a diverse transportation system in the U.S. Jan 4, 2008

Airlines could have avoided their current predicament had they locked in fuel costs when oil prices were lower. But US carriers have been hesitant to hedge in part because it ties up cash. Others equate hedging, which helped Southwest Airlines post consistent profits even during the industry's five-year downturn, with gambling. Without control over fuel costs, which vie with staff as airlines' biggest expense, more and more routes become unprofitable, forcing cutbacks. Jan 3, 2008

Oil hits $100, sending airline shares down. The price of oil hit $100 a barrel on Wednesday Jan. 2, and some observers say soaring prices could start to significantly affect the economy. The high price of oil sent shares of airlines to their lowest point in four years. Fuel is the industry's highest expense, and it is unclear how long carriers can continue to boost fares to offset higher fuel costs, observers say. Jan 3, 2008

The Association of Flight Attendants, also bracing for consolidation, will meet other flight attendant unions in January to plot strategy in the event of further industry change. The AFA's Friend has no "illusions that we're going to get back everything we lost in bankruptcy" in contract talks, but the unusual alliance of flight attendant unions may blunt the merger-related trauma. By most measures, airline unions were weakened by their struggles in the last few years. The lone merger in 2005 of the old US Airways and America West left pilots at the new company bitter and divided over failed attempts to merge their contracts. Mechanics at United are considering new representation with the Teamsters. They are currently with the Aircraft Mechanics Fraternal Association. Jan 3, 2008

US Airline Unions Wants To Recoup Losses. US airline workers, angry and poorer after years of wage and benefit cuts to help save their companies, are determined to recoup some of their losses and avoid new hardships if the industry is transformed through mergers in 2008. Unions have dealt with industry turmoil many times. But after several acrimonious airline bankruptcies -- marked by pension terminations and job losses for the rank and file, while some executives fattened their wallets -- union mistrust of management has never been greater. John Prater, president of the Air Line Pilots Association (ALPA) representing 60,000 pilots in the United States and Canada, said bankruptcies and steep concessions created a foundation of unrest that fails to work in the service industry. Patricia Friend, president of the Association of Flight Attendants (AFA), agreed. "The concessionary period is over," she said. But it is more than charged rhetoric spewing from the unions. The workers aim to protect themselves as much as possible from any fresh drive for big cost cuts. Jan 3, 2008

US economy slowing, people may object to fare increases but a separate fuel charge could be more widely accepted as consumers themselves grapple with fuel costs. If airlines do unbundle fuel costs from ticket prices, it would not be the first time. During the energy crisis of the late 1970s, charter airlines had separate fuel charges that were set just before takeoff. Jan 3, 2008

The airline industry has been struggling to extend a recovery that began in 2006 with airline cost-cutting and a series of fare increases. With oil prices touching a record USD$100 a barrel on Wednesday Jan. 2, airline shares fell sharply. United AirlinesAo UAL fell 10.7 percent to USD$31.83 on Nasdaq. Northwest Airlines fell 9.7 percent to USD$13.10 on the New York Stock Exchange. Delta Air Lines fell 7.9 percent to USD$13.71 on the NYSE. In light of the tough market conditions, airlines can ill afford operational errors that could increase costs and alienate travelers. Last year, JetBlue Airways' reputation for customer service was sullied when a winter storm forced it to cancel more than 1,000 flights. Jan 2, 2008

Airlines make keeping planes full a key strategy of recovery. Many airlines have recovered from bankruptcy by doing a better job of keeping planes full, according to a report by IBISWorld. Seat counts rose by 9.5% in the past five years, while passenger counts climbed 20%. Dec 31, 2007

US DOT makes 2009 China routes final. The DOT on Friday finalized its decision to award flights to China to Northwest Airlines, US Airways, Continental Airlines and American Airlines. The carriers may start service in 2009. Dec 31, 2007

AirTran Airways

AirTran Airways said it will remain headquartered in Orlando and plans to build a permanent, "hurricane-hardened" systems operation control center at MCO. It said the existing SOC was damaged in a 2004 storm. It will add 121 jobs to an Orlando-based workforce numbering 300. Jan 4, 2008