Airline Finance News - North America

AirGuide Business, June 23, 2008

Jun 23, 2008

The political debate over energy policy gained sharper partisan focus this week as President George W. Bush lined up with Republican presidential candidate John McCain in calling for more oil and gas exploration off the U.S. coasts and in oil-shale regions of the West. Democrats, meanwhile, are going after market speculators and trying to impose new taxes on oil companies to finance alternative-energy projects. On Wednesday, Sens. Joe Lieberman, I-Conn., and Susan Collins, R-Maine, introduced legislation that some say is the most extreme proposal yet: the bill seeks to rein in commodities trading by prohibiting pension funds, index funds and other large investors from commodities markets altogether. This proposal and several others will be debated next week on Capitol Hill. Jun 20, 2008

US Environmental Protection Agency is "days away" from issuing a broad document that will detail "ways in which regulation of greenhouse gas emissions" could apply under the Clean Air Act, potentially leading to establishment of carbon dioxide emissions regulations for a broad range of industries including commercial aviation, a top EPA official said yesterday. Speaking at the Eco-Aviation conference presented by Air Transport World and Leeham Co. in Washington, EPA Office of Transportation and Air Quality Director-Compliance and Innovative Strategies Division Karl Simon said that if an "appropriate [public] endangerment determination is made" regarding emissions produced by a given industry, the agency has the authority to set standards. Regarding aircraft, "the authority is not limited to setting standards for new aircraft and new engines" and could include existing, in-service equipment. Jun 20, 2008

Neither party fully understands how the spike in oil prices is affecting the economy, writes Dick Morris in The Hill. He notes that many experts attribute the huge increase largely to speculation. Morris writes that lawmakers should regulate speculation, adding "we don't need another sub-prime or savings-and-loan crisis on our hands right now." Jun 19, 2008

The United States domestic market, the two airlines will begin broad code-sharing to create itineraries using both carriers, as well as frequent flier programs, elite customer recognition and airport lounge reciprocity. Under code-sharing, customers will benefit from a coordinated process for reservations/ticketing, check-in, flight connections and baggage transfer. Frequent flier reciprocity will allow members of Continental's OnePass program and United's Mileage Plus program to earn miles in their accounts when flying on either partner airline and redeem awards on both carriers. Travel on either carrier will also count toward elite customer recognition. Similarly, each carrier's customers will have access to both Continental's Presidents Club network and United's Red Carpet Club network of airport lounges. Jun 19, 2008

U.S. airlines and analysts agree that soaring fuel prices will likely lead to multibillion-dollar losses for the carriers in 2008. Lawmakers can prevent airline bankruptcies by repealing limits on foreign ownership and allowing carriers to negotiate with competitors, The Wall Street Journal's Holman W. Jenkins, Jr. writes. "Without a decline in fuel prices, massive airline bankruptcies are almost certainly coming. About the only suspense is who will be in the White House when they hit," Jenkins notes. Jun 18, 2008

A Stanford Transportation Group report found that the number of business-class and first-class travelers has stalled, despite a general increase in domestic traffic. Premium trips declined to less than 10% of overall domestic travel last year, from 20% in 2000. The report found that the number of premium trips remained at 41 million, about the same as in 2005. Jun 17, 2008

Air Line Pilots Association (ALPA) together with other transport unions, organizations and corporations has sent a letter to congressional leaders urging them to stabilize energy markets and end the speculation that has lead to recent increases in oil prices and put an economic stranglehold on US airlines. Included in the letter were three points that ALPA believes should be addressed by congress: closing loopholes that allow institutional investors to avoid limits on the size of their investments; ensuring all energy traders are subject to the limits imposed on US exchanges, and imposing appropriate disclosure/financial requirements on institutional investors. Jun 17, 2008

Airlines today will ask lawmakers to take immediate action to curtail speculation in the oil markets. Air Transport Association President James May will testify at a hearing aimed at investigating complaints against speculators. He noted that soaring fuel prices could cause 2008 to be the worst year financially for airlines in history. "If Congress does not act soon, this country will not have a viable airline industry," May said. Jun 17, 2008

The US DoT said domestic carriers lost more than $1.3 billion in the first quarter, the industry's worst financial performance in three years. Fuel accounted for nearly 30% of the industry's operating costs, up from 13.8% in the first quarter five years ago. Jun 17, 2008