Is this an indicator of where we are headed?

[Cat Driver]

I see that British airways are grounding part of their fleet due to rising fuel costs.

[square]

We just increased our prices

[North Shore]

Sure, why not..

Oil becomes more difficult to get... supply goes down... demand increases... prices rise... airfares rise... people start to get priced out of the market... airlines start cutting back flights to keep their loads up... don't need so many planes... Perhaps it's time to start buying land near boneyards in Arizona?

[Doc]

This could stop the "music". Hope everybody enjoys their seat.

[Changes in Latitudes]

my seat...why yes...i love my...seat...

[square]

Let me be the first to suggest nuclear reactor engines.



Project Prometheus. @#$! yes.

[Wacko]

... yep... pretty much like all the other threads in regards to this topic

[b1ngnx33]

Nuclear engines? Oh noes.....

I can't afford a nuclear suit....and i know the company won't get me one.

mmmmmm....death by radiation.

As far as I know, radiation death really sucks. A bullet is better.

[Lommer]

Actually, the USAF did experiment with nuclear powered aircraft. As described in the wikipedia article below, one B-36 carried an operational 1 MW reactor; think of how long that aircraft could remain on station over greenland, waiting for the signal to go bomb the russkies.

http://en.wikipedia.org/wiki/B-36#Experiments

Still, I'm kinda glad I live in a world where that technology didn't go any further...

[sez]

Crude Oil price is 129.05 USD now. and one year estimation is 167.77 USD. that means we'll face higher costs in closing days. Actually increase in oil prices is not related with the difficulties to get. Actually technology is getting better. It's more about speculations. Countries like USA, UK, Holland, Iran, Russia, Canada, Venezuela and All Arabic Countires are likely hoping higher prices to have more income. 4 years ago Crude oil price was about 30 USD. Alberta has huge reserves but the cost to get Oil is about 30 USD due to rezerves are in sand. Actually this explains the Boom in Economy for Whole World. Costs are about 18-30 USD and the prices are about 130 USD. but permanent high prices cause Inflation, and costs are getting higher and higher... Consequently to avoid diminishing marginal utility, prices are getting higher. finally... we are screwed if we don't get higher pay cheques.

[Rockie]

Like most people I can get worried about the state of the industry and the effect of rising fuel costs as well. But I check myself by thinking about Europe where they fly 737's and 320's around full of people who aren't paying much for their ticket, and where the fuel costs are much higher than North America. The salaries are pretty good over there too. Bigger brains than mine run the business side of aviation (hopefully) and since they seem to be able to figure it out over there we should be able to over here as well. In any event, we at the coal face can't do much about it except sacrifice our salaries when the inevitable demand arrives from said business brains, and I'm tired of doing that.

[bmc]

MARKET OUTLOOK: HUNKERING DOWN FOR BAD TIMES

Airline Business, 20 May 2008

It was only a few months ago that the greatest threat to the financial performance of the airline industry was considered to be "the economy". But at the present time there are very few industry observers who would deny that now the threat is quite clearly fuel.

On the basis of its latest forecast, IATA predicts that the industry fuel bill for 2008 will be some $65 billion higher than it was in 2007. If we put this into context this is equivalent to almost 13% of global airline revenue. IATA estimates that the industry's fuel bill will increase from some $136 billion in 2007 to close to $200 billion in 2008. This could mean that operating losses could well reach $50 billion without any offsetting effects from higher fares or more overt fuel surcharges.

What is increasingly clear is that the industry overall is likely to move into loss in 2008, and if there is no improvement in the price of oil by 2009 losses could well be even worse next year.

To put this into perspective, operating losses in 2001 were just under $12 billion with a further $5 billion in 2002, but fuel only represented some 13% of operating expenses rather than the close to 40% it is expected to represent in the current year.

So what can be done? Is it just a question of gritting teeth and hanging on? Perhaps, but it is clear that for a number of airlines the consequences of this alone could be financially catastrophic. Although there tends to be a focus on the profitability of almost any industry, the real need for most businesses - and airlines are no different - is for cash.

In this respect the consequence of the higher fuel price is direct and will quite quickly have an impact on levels of airline debt. Although balance sheets are better than they were back in 2001/02, they are still not particularly strong. Fare increases, higher surcharges, and for some of the low-cost, no-frills airlines raising ancillary charges - which may have some success - may provide some relief from the full effects. However, as I have argued many times before, the rules of economics do apply to the airline industry and it is only possible to increase fares if there is relative excess demand.

Against a background in the USA where there are clear signs of a combination of economic slowdown and, for some, actual recession, pricing power from whatever source is likely to be non-existent. We shall watch the latest increases in ancillary charges to see if they result in a behavioural change and a revenue impact, although I believe that at least in the near-term they will provide a route for at least some additional revenue.

Limited Scope

The scope to reduce costs to offset the increase in the fuel price is limited. As a result, for all airlines there is likely to be a significant deviation in their expected cash flow, which will need decisions to be taken in a number of areas - not least in respect of the need for near-term capacity. For others the cash squeeze may mean that payments for pre-delivery aircraft become unaffordable, whether or not the airline believes the additional capacity is still needed.

Generalisations are of course dangerous and for some airlines this period of pain will represent an opportunity. However, at least for now the real questions should be: how far will profits fall, cash decline and debt increase? And how many of the orders for the 150-seat order book will not be delivered to the customer that places the order? Or indeed, how many of these orders will not be delivered at all?

Of course only time will tell, but one thing is clear. This downturn appears likely to be far more painful than any that have been experienced over the last quarter of a century or so.

[Changes in Latitudes]

SO should I jump aboard Jazz now or would I be the first one to get laid off now?

As someone who is about to get married and buy their first house, I am feeling royally flucked.

[2milefinal]

Umm that is a good question Changes in Latitudes
I would be very careful and think very hard about any move you make right now.
IMHO the only reason the airlines are still hiring is because it is very easy to lay employees off later.

To put this into perspective, operating losses in 2001 were just under $12 billion with a further $5 billion in 2002, but fuel only represented some 13% of operating expenses rather than the close to 40% it is expected to represent in the current year.
Those are some wild numbers.

[bmc]

There's wisdom in your words, Clunkdriver. I think that is good advice for the near term.

This just off the wire:

American Airlines to slash capacity up to 12 percent
Wednesday May 21, 10:18 am ET
By Kyle Peterson

FORT WORTH, Texas (Reuters) - American Airlines said on Wednesday it plans to cut jobs, retire old planes and slash domestic capacity by 11 percent to 12 percent in the fourth quarter as fuel prices reach record highs and the weak U.S. economy saps air travel demand.
The world's largest airline, owned by AMR Corp (NYSE:AMR - News), also said it would charge $15 for passengers' first checked bag starting in mid-June, an unprecedented move by a major U.S. airline as it tries to claw back more of its extra fuel costs.

American said it would take at least 75 mainline and regional aircraft out of its aging fleet, the biggest scaling back of the carrier's services since the attacks of September 11, 2001. It did not say how many jobs would be cut.

In the last two years, most U.S. carriers have removed capacity from less profitable domestic routes and introduced charges for checking extra bags as they try to keep up with rising fuel costs and fierce competition.

In March, Delta Air Lines Inc (NYSE:DAL - News) said it would cut 2,000 jobs and reduce domestic capacity by 5 percent, on top of a 5 percent cut already planned, for a year-on-year decrease of about 10 percent.

In April, Northwest Airlines Corp (NYSE:NWA - News) -- which has agreed to be bought by Delta -- announced its own plan to take some older planes out of service and cut domestic capacity by about 5 percent.

[TG]

There might be a bit more than British airways grounding part of its fleet.
http://www.lifeaftertheoilcrash.net/

Oil is increasingly plentiful on the upslope of the bell curve, increasingly scarce and expensive on the down slope. The peak of the curve coincides with the point at which the endowment of oil has been 50 percent depleted. Once the peak is passed, oil production begins to go down while cost begins to go up.

In practical and considerably oversimplified terms, this means that if 2005 was the year of global Peak Oil, worldwide oil production in the year 2030 will be the same as it was in 1980. However, the world’s population in 2030 will be both much larger (approximately twice) and much more industrialized (oil-dependent) than it was in 1980. Consequently, worldwide demand for oil will outpace worldwide production of oil by a significant margin. As a result, the price will skyrocket, oil dependant economies will crumble

I'm surprise swede didn't come up with that link before

[Kosiw]

Now all we need is the chicken flu pandemic to kick in

[sky's the limit]

I see American Airlines has cut domestic capacity by 11% today citing fuel prices and a slow economy - here we go....

stl

[carholme]

As well, thomas Cook is parking 9 of its fleet this fall and not replacing 757s which are lease returns. RyanAir has plans to park up to 20 a/c.

carholme

[Cat Driver]

Rising fuel prices will not really affect me and my sail boat though.

[invertedattitude]

There is obviously a lot of skepticism and fear in the airline industry these days, even moreso than 9/11

Some airlines are still making money but for how long? How long can gas prices remain like this?

One has to ask just what the hell are governments doing with the massively higher windfall from the gas taxes?

[spin drift]

As well, thomas Cook is parking 9 of its fleet this fall and not replacing 757s which are lease returns.

Great that means more purple tail 757 flying around for Fed-Ex.
But unfortunately it looks like its time to turn on the Seat Belt Sign and stay in you're seat.

[foxmoth]

its all just math really.

find a good job and stick with it. Here we go.

Nobody here has mentioned Cathay dumping slow revenu routes.

[foxmoth]

its all just math really.

find a good job and stick with it. Here we go.

Nobody here has mentioned Cathay dumping slow revenu routes.

oops slow finger on submit buton. sorry

[Dockjock]

At least a ton of boomers are retiring to help cushion the downturn.