Enough Is Enough Fuel Cost And Aa Layoffs

[410OhOne]

American Airlines to Furlough Up to 1,100
10/24/2004 2:44:00 AM
DALLAS, Oct 24, 2004 (AP Online via COMTEX) -- American Airlines, struggling with rising fuel costs and competition from low-fare carriers, will furlough up to 650 maintenance workers in Kansas City and St. Louis and up to 450 pilots, the company said in a memo given to employees Friday.


Soaring Fuel Costs Undermining Airlines
10/28/2004 8:52:00 PM
Oct 28, 2004 (AP Online via COMTEX) -- Even as big airlines are beginning to successfully rein in labor costs - $1 billion in annual concessions from Delta's pilots being the latest example - soaring fuel expenses are essentially negating their effects, leaving many of the carriers in perilous financial shape.



Then Exxon Mobil comes in with this;
DALLAS - Exxon Mobil Corp. saw fourth-quarter earnings jump 63 percent as it benefited from higher prices for crude oil and natural gas.

Exxon Mobil, the world's largest publicly traded oil company, said Thursday that it also set a record for earnings in one year, $21.51 billion, nearly double its profit for all of 2002.

(and by the way do some research, this record beat the previous record, as well as the previous record, as well as the previous record....can you see where I am going with this?)

Now I ask you....
I have one simple question.

The question is this......

Why is fuel approaching $60 a barrel and what can we do at a grassroots level as US citizens with a voice to change it?

 

[goingboeing]

American Airlines to Furlough Up to 1,100
10/24/2004 2:44:00 AM
DALLAS, Oct 24, 2004 (AP Online via COMTEX) -- American Airlines, struggling with rising fuel costs and competition from low-fare carriers, will furlough up to 650 maintenance workers in Kansas City and St. Louis and up to 450 pilots, the company said in a memo given to employees Friday.


Soaring Fuel Costs Undermining Airlines
10/28/2004 8:52:00 PM
Oct 28, 2004 (AP Online via COMTEX) -- Even as big airlines are beginning to successfully rein in labor costs - $1 billion in annual concessions from Delta's pilots being the latest example - soaring fuel expenses are essentially negating their effects, leaving many of the carriers in perilous financial shape.



Then Exxon Mobil comes in with this;
DALLAS - Exxon Mobil Corp. saw fourth-quarter earnings jump 63 percent as it benefited from higher prices for crude oil and natural gas.

Exxon Mobil, the world's largest publicly traded oil company, said Thursday that it also set a record for earnings in one year, $21.51 billion, nearly double its profit for all of 2002.

(and by the way do some research, this record beat the previous record, as well as the previous record, as well as the previous record....can you see where I am going with this?)

Now I ask you....
I have one simple question.

The question is this......

Why is fuel approaching $60 a barrel and what can we do at a grassroots level as US citizens with a voice to change it?

[post="196502"][/post]​

The is one simple solution for fuel costs.RAISE the ticket prices! It is crazier than hell to sell a product for less than it cost to produce it.
The spineless airline mangement is AFRAID to raise ticket prices in fear of passengers staying home.Fear is the PROBLEM and not excessive wages of the employees.
If all airlines would raise the ticket prices to cover the cost of fuel then the consumer would pay the price to fly.

It is common sense. Dad or Mom is not going to tell little Johnny or Suzie that they now cannot fly to Disneyland for vacation because the airline tickets now cost $20.00 more per ticket.

Some ex-airline CEO's have even stated in interviews that management is afraid to raise ticket prices.

 

[AAStew]

I don't mean to be rude, but are you living in a hole? Passengers will go to another carrier for a damn couple of dollars! Unless EVERY airline raises their prices across the board, we cannot raise our prices! The only thing we can do is eliminate routes where we just cannot compete and stick to those like international where we don't have the jetblues, Independence, or whatever little lowcost carrier has decided to fly. As you can see by ATA's bankruptcy and Independence toying with bankruptcy, they are hurting also. But it is just a matter of time and who can stick it out.

 

[jimntx]

Why is fuel approaching $60 a barrel and what can we do at a grassroots level as US citizens with a voice to change it?

[post="196502"][/post]​

It's very simple actually. Just as the price of airline tickets is too low because there are too many available, the cost of oil is high because there isn't enough of it to meet demand. We are use to having an almost unlimited supply of oil to feed our unconscionable demand for cheap fuel. I think this statistic is correct...
The USA has 3% of the world's crude oil reserves, 8% of the world's population, and consumes 25% of the world's oil annually.

This was not a problem until the Asian continent began to be heavily industrialized. The demand for energy from China and India has grown exponentially over the past 10 years. With the improvement to their economies brought about by outsourcing U.S. manufacturing jobs and plants to those countries, they can now afford to pay the higher energy costs. Now I don't want to start a Bush vs. Kerry name-calling session disguised as a political debate, however...

The majority of the world's known crude oil reserves are still located beneath the soil of countries which are predominantly Muslim in their religion and Arabic in ethnicity. In case you haven't been reading the papers or watching any TV in the last couple of years, there are some problems with the U.S.-Middle East relationships these days. These problems do not exist between those countries and India and China. Those countries are selling their oil to India and China wherever possible.

Even some of the oil companies have been saying for years that the U.S. needed to begin development of alternative energy sources because oil is a finite resource. However, the government leaders in this country--regardless of party--have not had the political cojones to effect such a change--fuel surtaxes to make people think twice about owning gas hogs and driving 2 blocks to the grocery store; luxury taxes on vehicles such as the Hummer; banning vehicles with only one occupant from the freeways during certain hours of the day; investing fuel taxes in public transportation rather than in pouring more concrete.

The day of reckoning appears to be arriving sooner than even the gloomiest of Cassandras could have predicted. We will probably never again see gasoline at a price below $1.50/gal or jet fuel below $1.00. And, this has nothing to do with the oil companies "gouging" the American public. We have enjoyed artificially low prices for too long. Ask a European what they pay for the equivalent of a gallon of gas. Ask that same European what they were paying 20 years ago. It has always been substantially higher than what we pay in the U.S. Instead of driving Hummers, they drive cars which are fuel efficient, and they do that as little as possible. They use public transportation whenever and wherever possible.

Yes, there are oceans of oil still below the surface of the ground. However, when you have pumped enough to the surface to significally reduce the underground pressure, the cost of getting the rest of it to the surface increases exponentially. And, a lot of the crude oil still underground is not of the "sweet crude" quality that is preferred. Some crude oil available today is so thick that you can turn a beaker of it upside down and it won't run out. It's more like tar than oil. It also cost a LOT more to refine oil like that.

It's not a conspiracy. It's economics.

 

[Oneflyer]

Those countries are selling their oil to India and China wherever possible.

Great summary, but I question the assertation that Arabs countries are giving preferential treatment to India and China. If you haven't noticed Pakistan and India have been on the brink of war for years.


The idea that ticket prices are low because upper management is scared to raise prices is incredibly dumb. It is entirely a supply and demand issue, the abuse of the bankruptcy laws is killing the entire industry.

One thing that I think upper management particulary at AA is scared to do, is go to a simplified pricing structure. I think everyone agrees that long term airline pricing will be simplified, but most of AA's management grew up in the days when the revenue management system was one of AA's greatest assets. Clearly with the internet and the decline in travel agent usage RM as we know it has passed its useful life.

 

[jimntx]

Great summary, but I question the assertation that Arabs countries are giving preferential treatment to India and China. If you haven't noticed Pakistan and India have been on the brink of war for years.

[post="196537"][/post]​

Three reasons why the India-Pakistan dispute is not an issue...
1. Nobody but India and Pakistan cares about Kashmir. The conflict is strictly territorial, not religious. Both countries are known to be "soft" on minority religions.
2. India has remained neutral in the current Mideast conflicts refusing to participate in the coalition of the willing.
3. Pakistan has been in bed with the U.S. for years which makes them suspect to the other Arab states. Pakistan likes our weapons better than the Russian product--more dependable, plus we can afford to loan them the money to buy the weapons, then forgive the loan. AND, Pakistan is not an OPEC member (you have to have oil in marketable quantities to belong).

 

[The Drunken Duck]

Why is fuel approaching $60 a barrel and what can we do at a grassroots level as US citizens with a voice to change it?

[post="196502"][/post]​

Fuel is approaching USD 60 / barrell because there is a limited amount of production capacity and utilization is reaching it. Since demand is inelastic, the increase does not result in a meaningful reduction in utilization. It may at higher prices.

Since oil is a fungible commodity, there is not much you can do at a grassroots level except the following.

1. Increase your energy efficient (purchase higher mileage cars, insulate your house, turn off the lights, make fewer trips in the car, use the AC less)
2. You could lobby your Congressman or Senator to require legislate higher mpg requirements in cars. You could also ask for legislation to support alternative energy sources (hydrogen, hydro dams, nuclear, wind).

That's all I could think of. By advised, these choices have costs. They all do. Someone will benefit and someone will lose. So don't delude yourself into thinking that a win/win exists.

In the end, the higher prices will incentivize incremental oil production (fields that were unprofitable at USD 20/barrel oil are now clearly in the money) and the higher prices will encourage capital to be invested in alternative energy sources. So that may help also.

As for airlines, they could raise prices. But remember, demand for air travel is elastic. As prices rise, people do stop flying. Not everyone pays non-rev charges. So, as travel decreases, airlines may be faced with excess capacity. WHich may be fine, but it will happen nonetheless.

 

[The Drunken Duck]

Great summary, but I question the assertation that Arabs countries are giving preferential treatment to India and China. If you haven't noticed Pakistan and India have been on the brink of war for years.

[post="196537"][/post]​

I have to agree, China and India are not getting preferential treatment. In addition, they are probably hurt more than the US because oil consumption is a higher percentage of GDP for them than the US, which is a post-industrial economy with a large services sector.

One thing that I think upper management particulary at AA is scared to do, is go to a simplified pricing structure. I think everyone agrees that long term airline pricing will be simplified, but most of AA's management grew up in the days when the revenue management system was one of AA's greatest assets. Clearly with the internet and the decline in travel agent usage RM as we know it has passed its useful life.

[post="196537"][/post]​

Not sure I would agree with you re: yield management. I think that it will still be around and although it is no longer a leading edge for AA. It is still important for airlines as they try and segment the customer group.

 

[eolesen]

As long as carriers like Jetblue, Southwest, and others are able to stay in the black despite the current fuel prices, there's not much hope that you'll see an overall rise in airfares. Maybe in a few markets, but not across the board.

Ironically, it's a lot like gas prices -- Exxon and Texaco don't determine the price at the pump in most major markets -- it's the high-volume guys like Speedway, Walmart/Murphy or Racetrac who set them. In markets which are too small to attract the high-volume retailers, you'll see higher prices. Not at all unlike Walmart's impact on traditional retailers like Kmart, JC Penny and Sears, or Walgreen's and CVS's impact on mom & pop pharmacies.

 

[NewHampshire Black Bears]

American Airlines to Furlough Up to 1,100
10/24/2004 2:44:00 AM
DALLAS, Oct 24, 2004 (AP Online via COMTEX) -- American Airlines, struggling with rising fuel costs and competition from low-fare carriers, will furlough up to 650 maintenance workers in Kansas City and St. Louis and up to 450 pilots, the company said in a memo given to employees Friday.


Soaring Fuel Costs Undermining Airlines
10/28/2004 8:52:00 PM
Oct 28, 2004 (AP Online via COMTEX) -- Even as big airlines are beginning to successfully rein in labor costs - $1 billion in annual concessions from Delta's pilots being the latest example - soaring fuel expenses are essentially negating their effects, leaving many of the carriers in perilous financial shape.



Then Exxon Mobil comes in with this;
DALLAS - Exxon Mobil Corp. saw fourth-quarter earnings jump 63 percent as it benefited from higher prices for crude oil and natural gas.

Exxon Mobil, the world's largest publicly traded oil company, said Thursday that it also set a record for earnings in one year, $21.51 billion, nearly double its profit for all of 2002.

(and by the way do some research, this record beat the previous record, as well as the previous record, as well as the previous record....can you see where I am going with this?)

Now I ask you....
I have one simple question.

The question is this......

Why is fuel approaching $60 a barrel and what can we do at a grassroots level as US citizens with a voice to change it?

[post="196502"][/post]​

==================================================

Start by "throwing out" (in the trash), the "Smirking Chimpanzee", that's currently taking up space, at 1600 PA. ave. !!!!!!!!!!!

NH/BB's

 

[goingboeing]

I don't mean to be rude, but are you living in a hole? Passengers will go to another carrier for a damn couple of dollars! Unless EVERY airline raises their prices across the board, we cannot raise our prices! The only thing we can do is eliminate routes where we just cannot compete and stick to those like international where we don't have the jetblues, Independence, or whatever little lowcost carrier has decided to fly. As you can see by ATA's bankruptcy and Independence toying with bankruptcy, they are hurting also. But it is just a matter of time and who can stick it out.

[post="196523"][/post]​

You have the same attitude of FEAR that that is causing AA mangement to make bad decisions on ticket prices.
All the passengers can't go to another airline because there isn't enough seats for all of them at SWA or Jet Blue.
I had rather fly an aircraft with a 65% load factor that makes a profit than with a 80% load factor and lose billons of dollars.Tell the customer that if they don't like the price then take their cheap ass somewhere else.
How long would Wal-Mart keep the doors open if they sold everything at a loss?Wal-Mart management will tell you if you don't like their prices go down the street to Target or K-Mart.
This is exactly what AA and other major carriers should be doing and they are afraid to.

 

[Decision 2004]

==================================================

Start by "throwing out" (in the trash), the "Smirking Chimpanzee", that's currently taking up space, at 1600 PA. ave. !!!!!!!!!!!

NH/BB's

[post="196782"][/post]​

Yeah, replace him with another rich snob that will screw the working man. That'll fix it alright.

Not to worry, it wont take organized labor to take a stand to survive, just rely on some worthless Politician and cast your vote, that will fix it all.

 

[NewHampshire Black Bears]

Yeah, replace him with another rich snob that will screw the working man. That'll fix it alright.

Not to worry, it wont take organized labor to take a stand to survive, just rely on some worthless Politician and cast your vote, that will fix it all.

[post="196927"][/post]​

==================================================

Dave;

I'll bet ya a cup of coffee, and a krispy kreme that the democrat(Native American/cherokee) beats your boy(the republican) for the senate seat in "OKIE" .

Are we on ??????????

NH/BB's

 

[410OhOne]

Two More Questions regarding Fuel Prices?

If there is a demand, and that demand is what is creating these high prices then lets slow down the demand and move to alternative energy sources or use less fuel period. Sure it isnt that easy, but what I am afraid of is this....If I go by a hybrid and I suddenly start getting 55 mpg and my neighbors see that my car has power, comfort, roominess, and they all go and buy one. What is to stop the CARTEL (kinda mobbish isnt it) from just adjusting prices to match demand? You know the oil producers are going to make a buck regardless of if we can get 15mpg or 115 mpg. Look at the price of gas in Europe. You can get fined if you leave you car idle over a certain amount of time. Look what their conservation efforts got them.

Second question.

Can everyone really fly SWA and Jetblue?
I went to SWA online and I tried to book a flight from STL direct to ATL. I have a business meeting and I need to close a deal right away. I couldnt fly SWA because they dont freakin go there. Sure they have awesome service and great planes and friendly people, but still they dont go there. So $10 or not, hell $50. I have to fly a carrier that goes there. My deal is far more valuable than jumping from plane to plane to save a buck. Next year when I get a family vacation, I damn sure aint gonna drag a 4 year old and 2 year old through 2 connections, layovers and baggage transfer just to save a buck.

 

[The Drunken Duck]

All the passengers can't go to another airline because there isn't enough seats for all of them at SWA or Jet Blue.
I had rather fly an aircraft with a 65% load factor that makes a profit than with a 80% load factor and lose billons of dollars.Tell the customer that if they don't like the price then take their cheap ass somewhere else.

[post="196921"][/post]​

I would suppose that not all passengers would go to SWA and as SWA's load factor increased, they would raise prices. BUT....you would have a leftward shift in the demand curve and the question is, can you make money at the higher price point and lower volume level. Remember, the airlines are a high-fixed costs, low marginal cost business.

How long would Wal-Mart keep the doors open if they sold everything at a loss?Wal-Mart management will tell you if you don't like their prices go down the street to Target or K-Mart.

[post="196921"][/post]​

Actually, Walmart can sell everything at a loss and still make money. They have negative working capital. They make money on the float. Let the suppliers take the hit on pricing power. That's why Kmart can't compete with them...they can't price low enough.