Fuel Forecasts

[jcw]

As you all know AA is generally accused of not giving forecasts - I thought this forecast was interesting

AA projects fuel of $1.73 to $1.78 for CY2015 I noticed another airline projected $2.25 to $2.35 - at the low end AA is projecting a 23% lower fuel per gallon

This will be great while it lasts when fuel starts to rise in costs we will see how this plays out

 

[Rogallo]

Gee, and who might the other airline be?

 

[bikeguy]

Just the greatest Airline in the world!

 

[WorldTraveler]

This will be great while it lasts when fuel starts to rise in costs we will see how this plays out

exactly....

did you also read the revenue forecast and note that AA is expecting to have NEGATIVE RASM growth in every region for the first quarter - which means that AA will get LESS REVENUE for flying the same number of passenger-miles as it did last year? and they don't expect the revenue situation to improve until the 3rd quarter and only then when AA starts to go year over year in the markets that are underperforming, which means the revenue won't improve but that the comparison will be between a lower 2015 and an equally low 2014?

and did you also note that AA still has $650 million in cash tied up in Venezuela that it may or may not be able to repatriate?

if AA's fuel advantage was so great, why did it not outperform the rest of the industry which did hedge?

further, AA still has merger related costs that other carriers do not have including higher labor costs related to the CBAs that will generate far larger cost increases for AA than it will for other carriers.

AA has a fuel advantage but its revenue underperformance, currency issues, merger integration costs, and labor cost increases all amount to far more than what any other carrier will lose in bad hedges.

 

[robbedagain]

why do u constantly point the negative crap when someone posts positive   yet you cannot even get off your lazy arse and give us a list of negative items delta does    go get help

 

[WorldTraveler]

I'm pointing out the truth.

If you need to live in a world where you have to surround yourself with half-truths and incomplete facts, then I feel sorry for you.

I have never doubted that AA would have a fuel cost advantage. I have repeatedly spoken about the concerns that I noted above - and which professional (ie paid) investment analysts noted today.

if you want something that DL did wrong, someone(s) there screwed up hedging. Other carriers managed to get out of hedges or didn't have as much tied up in them than DL did.

however, DL, as I have repeatedly noted is absolutely leading the industry in revenue growth and in adapting to changing market dynamics - and also generates more than enough free cash that the hedge screw up can easily be covered.

UA also is making a comeback and WN is now in revenue growth mode with the merger now complete. one analyst noted that "WN is up and AA is down"... exactly the type of relationship that I said would exist between the two N. Texas airline (not to be confused with Parker's two Dallas based airlines.

yes, AA has a fuel cost advantage. but it has a number of significant and unique challenges that other carriers do not have.

It is precisely because investors see more concern from what AA said and reported compared to other airlines that AAL led the airline industry down yesterday and today.

 

[topDawg]

As you all know AA is generally accused of not giving forecasts - I thought this forecast was interesting

AA projects fuel of $1.73 to $1.78 for CY2015 I noticed another airline projected $2.25 to $2.35 - at the low end AA is projecting a 23% lower fuel per gallon

This will be great while it lasts when fuel starts to rise in costs we will see how this plays out

I am curious what AA internal planning on fuel is. At Delta is 2.80-3.00 a gallon. 
 
I can't imagine AA isn't at least preparing for the same. With OPEC basically causing fracking to become unprofitable now with low prices I wouldn't get to use to these fuel prices. 

 

[jcw]

This thread is about fuel not revenue

Not sure of the internal just what has public ally been reported

 

[FWAAA]

I am curious what AA internal planning on fuel is. At Delta is 2.80-3.00 a gallon. 
 
I can't imagine AA isn't at least preparing for the same. With OPEC basically causing fracking to become unprofitable now with low prices I wouldn't get to use to these fuel prices.

The executives said in the conference call that they plan to run the airline as if oil were still $100/bbl (which equates to a $3/gal price). They don't plan on adding capacity or cutting fares.

Publicly, they plan on paying about $1.73/gal for jetA this year. If that holds, and fare wars don't break out, then profits will be huge. $8 billion to $10 billion huge. I doubt all of that holds true, as oil will likely go up and if not, fare wars will happen.

 

[WorldTraveler]

The executives said in the conference call that they plan to run the airline as if oil were still $100/bbl (which equates to a $3/gal price). They don't plan on adding capacity or cutting fares.

Publicly, they plan on paying about $1.73/gal for jetA this year. If that holds, and fare wars don't break out, then profits will be huge. $8 billion to $10 billion huge. I doubt all of that holds true, as oil will likely go up and if not, fare wars will happen.

you can't make that prediction because it involves talking about the revenue environment which some seem to think is off limits.

8 to 10 billion profits WILL NOT happen because AA is not generating the revenue to support that kind of profitability even with lower fuel.

and the issue is much less about generalized fare wars but about increased competition IN AA SPECIFIC markets

 

[FrugalFlyerv2.0]

Deny.  Deflect.  Spin.
 

did you also read the revenue forecast and note that AA is expecting to have NEGATIVE RASM growth in every region for the first quarter - which means that AA will get LESS REVENUE for flying the same number of passenger-miles as it did last year? and they don't expect the revenue situation to improve until the 3rd quarter and only then when AA starts to go year over year in the markets that are underperforming, which means the revenue won't improve but that the comparison will be between a lower 2015 and an equally low 2014?
 

 
and did you also note that AA still has $650 million in cash tied up in Venezuela that it may or may not be able to repatriate?
further, AA still has merger related costs that other carriers do not have including higher labor costs related to the CBAs that will generate far larger cost increases for AA than it will for other carriers.
 

 
AA has a fuel advantage but its revenue underperformance, currency issues, merger integration costs, and labor cost increases all amount to far more than what any other carrier will lose in bad hedges.
 
 

 
Lather. Rinse.  Repeat.

 

[IORFA]

UA will be have increased costs as they can't ignore what AA pays and then Delta will do its best to immediately put some more cash into Delta employees left pocket, while simultaneously taking some of it out of the right pocket. Can anyone say ridiculous medical premiums and out of pocket expenses? They put dumb juices in the ice tea down there in ATL! Apparently, some of it is shipped to GRU as well. In the end, they will all be paying close to the same or more.

 

[WorldTraveler]

you are exactly right. the revenue environment is strong enough that AA and DL are in something of a one-ups-manship contest to increase employee salaries and really try to force up each other's costs - as well as those of competitors.

UA and WN are the carriers most likely to be hurt in the process and that is not lost on either AA or DL's mgmt.

AA is very aware of the increased competition from WN and would love to do nothing more than force WN's costs up or at the least create employee dissatisfaction at WN because the gap between WN and legacy carrier employee salaries is shrinking.

UA is making a lot of changes to its network but in general is reducing or limiting capacity which means they have less opportunities to spread higher employee costs over their network without pushing down their yields. So UA is in a quandary.

And of course AA and DL are in their usual hypercompetitive mode. Parker and his unions are trying to argue that his people are higher paid than DL employees, but only if DL's profit sharing is not counted (which incidentally is finalized at over 16.5% for 2014, of which 5% has been paid which means DL employees will receive gross profit sharing in Feb that is more than twice what they received last fall as the first part of their 2014 profit sharing. In fact, part two alone of DL's profit sharing payout will be larger than any other carrier and larger than in the past)

It appears that DL wants to get its pilots and likely other employee groups to roll large portions of DL's profit sharing into the base rates which AA will be forced to match as part of the JCBAs which have not included profit sharing. DL also stands to gain by forcing UA and WN salaries up.

DL's employee compensation is likely to keep going up because of higher profitability but because Parker doesn't believe in profit sharing, DL wants to increase its employees' salaries in a way that Parker is forced to increase his as well.

as for the increased cost of health care, you would do well to understand the environment throughout the US. this from Marketwatch


"Premiums for employer-sponsored coverage have been rising, averaging $5,478 in 2013 for employee-only policies, up from $3,848 in 2005. Family coverage during the same eight-year period jumped to $16,302 from $10,367, the study finds."

DL reworked its health care plans and will offer a reenrollment option - so it is a little premature to say that employee costs for DL's health care plans are out of line with the rest of the industry. We quite simply do not know at this point.