Airline Finance News - North America

AirGuide Business, June 30, 2008

Jun 30, 2008

In what represents the first time in a decade that the AAA has forecast a lower number of people taking driving vacations on consecutive holidays, fewer people are expected to drive or fly over the Independence Day weekend, compared to last year. The AAA expects 4.54 million Americans to fly during the holiday weekend, down 2.3% from the 4.64 million who flew last year. The Air Transport Association said that nonetheless, passengers can expect flights to be full. Jun 27, 2008

The negative effect the current airline crisis is having on leisure and business travel, as well as the travel agency industry, was underscored by testimony by American Society of Travel Agents' Senior Vice President of Legal and Industry Affairs Paul Ruden, Esq. testified at a House Committee on Small Business hearing. As these practices continue, so too will the already dire erosion in goodwill and trust between carriers and the traveling public. Viewed in light of what the FAA projects to be an increase in the number of U.S. passengers from the current 689 million to 1.1 billion per year in 2025, the convergence of these industry practices paints a frankly bleak picture. Jun 27, 2008

If oil prices stabilize, airline stocks could double or triple, according to a Wall Street analyst. "Once oil stabilizes, and it becomes clear to the broad group of investors and pundits that the legacy airlines are not all going out of business, we expect a doubling or tripling in airline share prices," said Avondale Partners analyst Bob McAdoo. Jun 26, 2008

Some aviation experts say the U.S. regulation system is nearing collapse and are calling for re-regulation of the industry. The soaring price of fuel has hurt carriers and now amounts to up to 50% of airlines' operating budgets, according to the Air Transport Association. The ATA is calling for regulation of oil speculation. "What we're looking for in the short term is for Congress to stop this speculation so we can get fuel prices down to a manageable level," an ATA spokesman said. "In the long term, we'd like to see the modernization of the air-traffic control system so we can continue to find ways to reduce our fuel burn." Jun 26, 2008

Congress on Tuesday was expected to extend federal aviation law and excise taxes for six months. Lawmakers have not reached an agreement on FAA reauthorization legislation to modernize the nation's aging air traffic control system. The effort would shift the ground-based ATC system to a satellite-based system. Jun 25, 2008

Pension managers say they are not responsible for the large spike in the price of oil even as lawmakers blame speculation for the increase. Lawmakers have introduced at least nine bills aimed at curbing speculation. Senate Homeland Security and Governmental Affairs Committee Chairman Sen. Joe Lieberman, I-Conn., on Tuesday outlined several proposals that would restrict institutional investors from investing in commodity futures. Jun 25, 2008

Treasury Secretary Henry Paulson downplayed the role of speculators in driving up oil prices and called for greater investment in oil-production capacity. "I think this is about supply and demand," he said. He also emphasized the importance of alternative energy, efficiency and conservation. Jun 25, 2008

According to ATA, fuel prices now average 30 to 50 percent of airline operating expenses, costing $41.2 billion in 2007, and these costs are projected to grow to $62 billion in 2008. These costs significantly threaten the U.S. airline industry's growth and ability to invest in fuel efficiency improvements, a sign of dire consequences for the United States. "The nation's airlines expect to lose in the range of $10 billion this year - a loss on par with the worst year in this industry's history," said Meenan. "High fuel prices are the sole reason." Jun 24, 2008

Airlines should adopt some of the military's practices to offset the surging price of fuel, said Paul Creider, general manager of the maintenance operation of American Airlines. Creider spoke at an aerospace summit in Oklahoma. The summit is focused on how military and commercial aviation can develop new efficiencies by learning from each other. Jun 24, 2008

Observers say higher fuel costs and consumers' weaker spending power could force more European airlines to consolidate. Analysts say strong summer passenger traffic could boost cash flow. However, carriers could face more pressure in September or October. Jun 24, 2008

The Air Transport Association of America (ATA), the industry trade organization for the leading U.S. airlines, today testified before the Senate Committee on Commerce, Science and Transportation to outline its continued, proactive efforts to further reduce the industry's greenhouse gas (GHG) emissions while identifying the severe economic consequences of the current "fuel price crisis." ATA Executive Vice President and Chief Operating Officer John M. Meenan presented statistics demonstrating that the airline industry represents just 2 percent of all domestic GHG emissions, as compared to 25 percent for the balance of the transportation sector. He testified that the investments the airlines have made that have resulted in the industry's outstanding environmental track record are being threatened by the historically high cost of jet fuel. Meenan urged Congress to craft policies that will help solve the problem, pointing out the severe consequences of inaction.Meenan told the committee that the industry continues to build on its impressive record of improving fuel efficiency and reducing its GHG output despite the high costs of jet fuel. U.S. airlines improved fuel efficiency by 110 percent between 1978 and 2007, resulting in 2.5 billion metric tons of carbon dioxide savings - roughly equivalent to taking 18.7 million cars off the road each of those years. Further, U.S. carriers burned almost 3 percent less fuel in 2007 than in 2000, but carried 20 percent more passengers and cargo on a revenue ton mile basis. Jun 24, 2008