Can The Merger Make Money With Oil At $60 A Barrel

[us0004us]

http://www.azcentral.com/arizonarepublic/b...mwestoil23.html




AmWest still up on merger
Airline analysts question whether higher fuel prices will kill profits
Dawn Gilbertson
The Arizona Republic
Jun. 23, 2005 12:00 AM
In pitch after pitch for his airline's proposed merger with US Airways the past month, America West Airlines Chief Executive Doug Parker has hammered home this point: The combined airline will make money with oil at a pricey $50 a barrel.

As oil prices have surged even higher this week, the question naturally becomes: Can it make money with oil at $60 a barrel?

America West says the answer is yes. Scott Kirby, the airline's executive vice president of sales and marketing and a key merger architect, ticked off a number of reasons, from increasing airfares to the likelihood of more flight cutbacks across the industry if conditions persist.

 

[jimntx]

Wrong question already. The question should have been "Can any airline make money with oil at $70/bbl? T. Boone Pickens, the awl man from Amarillo, is predicting $70/bbl and $3/gal gas by the end of the year. If you don't know who T. Boone is, he made a huge fortune as a wildcatter and hedge fund operator in the oil bidness in Texas. He knows whereof he speaks.

I did some "what if" calculations yesterday. If jet-A is averaging $1.73/gal when gasoline is averaging $2.25/gal (the approx. prices right now), then jet-A will sell for $2.28/gal if gas goes to $3 (using the same ratios).

I'm so junior at AA, I'm sure I'm toast if that happens. The company will have no choice except to cut back to just the routes they KNOW they can make money on consistently. This won't work for the long run, but it will work for short term relief from higher fuel prices.

 

[savyinvestor]

[u rl=http://www.azcentral.com/arizonarepublic/business/articles/0623amwestoil23. $60.-$70. a bbl. no way. Savy

 

[jimntx]

Well, we'll see about that, won't we? After all, it wasn't too long ago that people were saying, ""$50/bbl for oil? No way!"

 

[jimntx]

At 1440 CDT...

LONDON (Reuters) - Oil prices hit $60 a barrel Thursday, rallying on U.S. reports showing that ballooning energy costs have yet to dent demand.

Analysts said oil was probably headed above $60 sometime soon but noted there also could be profit-taking on the way.

Rest of the article

 

[gso-crew]

Fox News reported yesterday that we may see $100. IM not kidding...

 

[savyinvestor]

I meant to say the merger is in danger at those oil prices. Savy

 

[Bear96]

Scott Kirby, the airline's executive vice president of sales and marketing and a key merger architect, ticked off a number of reasons, from increasing airfares to the likelihood of more flight cutbacks across the industry if conditions persist.

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I love airline management's logic. They keep waiting for someone else to make these "flight cutbacks," while they themselves keep having dreams of growth and increasing market share for their airline. Great plan.