Oil Not Management Will End This Airline + Others

[delldude]

and for the latest on oil and your future.......................

texas tea,black gold

 

[jimntx]

Latest from Reuters in London says NY May delivery is trading over $58.00/bbl in London and September contracts closed at over $60/bbl.

Don't worry, 'Dude. It's all just irrational exuberance. I have it on good authority that it can't keep going up! There is nothing supporting these prices.

All together now, in C.

(to the tune of Jesus, Loves Me)

"Oil prices coming down, this I know.
For the pilots tell me so.
Nothing supports high prices here.
$30/bbl is drawing near.
Yes, oil is coming down.
Yes, oil is coming down.
Yes, oil is coming down.
The pilots tell me so."

 

[delldude]

enron ring a bell??

 

[jimntx]

Enron is not really a good analogy. The Enron debacle occurred because there was nothing supporting the company's stock price. It was all a house of cards.

The oil price is supported by short supply, heavy demand, restricted refining capacity, and American consumers' insatiable thirst for petroleum products--specifically, gasoline. Until such time (which hasn't happened yet) that the average American chooses to ride public transportation or car pool because it is "getting too expensive to drive to work alone in a personal size Sherman tank", oil prices can continue upward because the oil companies can just keep raising gasoline prices.

 

[boeing787]

Crude today went over $58 at around 11am. I know USA320 it's going down right...of course.it is.. all of your analysis is always right on.

Here's an easy one for you...crude over 60 next week! 😛 😛

 

[mweiss]

The game theory explanation of what's going on would take about three pages of writting, but I'll summerize.

Good summary, and overall on target.

Another thing to remember, who of all the majors have the most fuel efficient fleets? (I'll give a hint, they start with U)

[post="260143"][/post]​

It's a fine question to ask, but it doesn't address the game theory. The question to ask, as it pertains to the "game" is: "What airline(s) has (have) the lowest fuel costs per ASM?" The answer to that question isn't the same as the answer to yours.

 

[BoeingBoy]

Michael,

I'll only point out that "fuel efficiency" can be a slippery term without a specific definition to keep everyone on the same page.

Using USA320Pilot's definition - average fuel burn per hour - an airline flying RJ's has a more fuel efficient fleet than we do since the RJ's have lower average fuel flows. However, as you point out, fuel burned per ASM would be higher.

When comparing US to the other majors, two factors come into play when talking about average fuel burn. First, our reasonably short average length hurts us in comparison (WN being the biggest exception). Second, our relatively small proportion of widebodies helps (except for the LCC's that only have narrowbodies) since they have higher average fuel flows.

Jim

 

[delldude]

Enron is not really a good analogy. The Enron debacle occurred because there was nothing supporting the company's stock price. It was all a house of cards.

The oil price is supported by short supply, heavy demand, restricted refining capacity, and American consumers' insatiable thirst for petroleum products--specifically, gasoline. Until such time (which hasn't happened yet) that the average American chooses to ride public transportation or car pool because it is "getting too expensive to drive to work alone in a personal size Sherman tank", oil prices can continue upward because the oil companies can just keep raising gasoline prices.

[post="260368"][/post]​

The oil price is supported by short supply, heavy demand, restricted refining capacity, and American consumers' insatiable thirst for petroleum products

don't forget a big china spot here...all those things we crave made from petro by-products sold everywhere and made in china are a major player in this debate.
all we need is some major action against several refineries worldwide and we have a economic bingo

 

[TheLarkAscending]

Crude today went over $58 at around 11am. I know USA320 it's going down right...of course.it is.. all of your analysis is always right on.

Here's an easy one for you...crude over 60 next week! 😛 😛

[post="260403"][/post]​

😀 😀 😛

 

[Busdrvr]

Good summary, and overall on target.

It's a fine question to ask, but it doesn't address the game theory. The question to ask, as it pertains to the "game" is: "What airline(s) has (have) the lowest fuel costs per ASM?" The answer to that question isn't the same as the answer to yours.

[post="260412"][/post]​

Sure they do, if you assume that the "nash" equilibrium is now a codition that gives U/UAL with the efficient fleets a higher utility than it's competitors. Additionally, the implication that U/UAL may very well survive transitions the equation to a game with long term objectives vs short term. Even then, in the past, with low fuel cost, a lower capital cost higher fuel consuming airline may have been able to establish price levels that allowed their survival while"killing" U, now, the the high capital cost airline may have the advantage.

 

[mweiss]

in the past, with low fuel cost, a lower capital cost higher fuel consuming airline may have been able to establish price levels that allowed their survival while"killing" U

Translation: NW used to have the advantage

now, the the high capital cost airline may have the advantage.

[post="260436"][/post]​

Translation: Now it's UA with the advantage.

And, if those were the only two airlines in the US, I'd agree with your assessment. However, they're not. And, even if they were, the situation would be very different if NW had WN's hedges in place. That's the real point behind my fuel CASM comment. It's not how much fuel the airplane burns, it's how much money the airplane burns via fuel. If everyone's buying on the spot market, the two are synonymous.

 

[RowUnderDCA]

Which is why U's restructering should involve NW replacing its Douglas/MD aircraft with U's Airbus aircraft.

 

[delldude]

Which is why U's restructering should involve NW replacing its Douglas/MD aircraft with U's Airbus aircraft.

[post="260454"][/post]​

without the employees mind you

 

[jimntx]

don't forget a big china spot here...all those things we crave made from petro by-products sold everywhere and made in china are a major player in this debate.
all we need is some major action against several refineries worldwide and we have a economic bingo

[post="260426"][/post]​

There is no doubt that when looked at from a percentage-increase standpoint, Chinese demand for crude oil has skyrocketed. However, if China consumed 2/bbls of oil last year and consumes 2000/bbls of oil this year, that's a 1000% increase. But, if you look at overall world consumption, the good ole USofA still consumes the majority of crude oil pumped and/or refined petroleum products. And the great majority of that consumption is in gasoline for private vehicles.

 

[Busdrvr]

Translation: NW used to have the advantage

Translation: Now it's UA with the advantage.

And, if those were the only two airlines in the US, I'd agree with your assessment. However, they're not. And, even if they were, the situation would be very different if NW had WN's hedges in place. That's the real point behind my fuel CASM comment. It's not how much fuel the airplane burns, it's how much money the airplane burns via fuel. If everyone's buying on the spot market, the two are synonymous.

[post="260450"][/post]​

Keep in mind WRT SWA's fuel hedges, they have a certain amount of fuel hedged, NOT A CERTAIN PERCENT. It just so happens that the amount equates to a certain percent at a certqain level of ASM's. The hedges are for SWA's FIRST 80% of it's current flights. On each flight after that, they pay the same as everyone else. IOW, if SWA doubled in size this tomorrow, then they would only be 40% hedged. This does not stop them from "subsidizing" an unprofitable new routew with a hedged old one however.