Us Airlines Seen Losing $3 Billion

[USA320Pilot]

US airlines seen losing $3 billion on weak revenue, fuel

NEW YORK (ATWOnline.com) - JP Morgan analyst Jamie Baker has widened his full-year loss forecast for the US airline industry to $3 billion from $1.7 billion previously and now predicts carriers will earn a "rather paltry" $500 million in 2005, although he notes that likely capacity reductions at United Airlines and US Airways "may afford considerable upside" to next year's earnings outlook.

In a report released yesterday, Baker attributed the diminished forecast to "higher fuel costs and softer revenue trends." That latter is actually the bigger problem--"airline earnings are far more sensitive to revenue inputs then oil inputs," he noted, while adding that the industry no longer should expect a cyclical domestic demand recovery that will push revenues higher. "If it hasn't happened by now, it won't likely any time soon," he wrote.

Respectfully,

USA320Pilot

 

[hp_fa]

Do you ever give the gloom and doom a rest? I know things suck right now, but do you need to wallow in it?

Go for a walk, see a movie, do something.

 

[700UW]

He thrives on it probably in a perverted way too!

 

[iflyjetz]

This way, he can say that you heard it from him first!

 

[usairways_vote_NO]

This way, he can say that you heard it from him first!

And it will be a lie too lol

 

[Heinrich]

Capacity Reductions? Mainline aircraft holding steady with E170s and CRJs being added weekly.

What is the analyst talking about?

 

[X-U]

I thought the latest round of concessions was to bring the fleet count to 300+?
Or is it going to be a capacity reduction with furloughs? Tell us oh mighty and omnipotent seer! I can be right all of the time too if I post conflicting information.

 

[Phoenix]

Children enjoy playing in the mud. It makes them feel comfortable. And besides, what does it hurt?

Leave them to their mudpies. They will probably grow out of it.

 

[mwereplanes]

US airlines seen losing $3 billion on weak revenue, fuel

NEW YORK (ATWOnline.com) - JP Morgan analyst Jamie Baker has widened his full-year loss forecast for the US airline industry to $3 billion from $1.7 billion previously and now predicts carriers will earn a "rather paltry" $500 million in 2005, although he notes that likely capacity reductions at United Airlines and US Airways "may afford considerable upside" to next year's earnings outlook.

In a report released yesterday, Baker attributed the diminished forecast to "higher fuel costs and softer revenue trends." That latter is actually the bigger problem--"airline earnings are far more sensitive to revenue inputs then oil inputs," he noted, while adding that the industry no longer should expect a cyclical domestic demand recovery that will push revenues higher. "If it hasn't happened by now, it won't likely any time soon," he wrote.

Respectfully,

USA320Pilot

Read it closely.

"airline earnings are far more sensitive to revenue inputs then oil inputs," he noted

At the risk of sounding simplistic and stating the obvious what we have here is a business selling its product for less money than it takes to produce it. And the employees are the ones who are being asked/forced to attempt to rectify the problem of not understanding or not having the guts to price the product correctly. Do you notice how he left employee costs out of the discussion?

Do you know what the net reduction of the CASM for U will be if the employees ante up the full amount Lakefield has thrown out there? Folks, it is minimal at best. Even the LCC's are living on borrowed time at these ticket prices. But they have the ability to absorb the foolishness and will reap the rewards when sane pricing comes back into the industry. In the meantime the majors slowly trudge along attempting to change the "business model" but are unable to swiftly do anything other than come to the workforce because that is the easiest and least complicated method for lowering costs.

We will be well over an 80% load factor in the most recent reporting period. If we cannot make money filling that many seats then it is painfully obvious supply and demand rules do not apply to the airline. Or the management doesn't understand the basic issue of supply and demand. I was hoping Lakefield might be different but based on what I'm seeing so far it is very discouraging.

mr

 

[geo1004]

Actually, I am interested to hear what capacity cuts the analyst is referring to? Where is US cutting capacity?

 

[cavalier]

At the risk of sounding simplistic and stating the obvious what we have here is a business selling its product for less money than it takes to produce it. And the employees are the ones who are being asked/forced to attempt to rectify the problem of not understanding or not having the guts to price the product correctly. Do you notice how he left employee costs out of the discussion?

Good Post because this rings so true!

I wonder if anyone figured out for giggles that if U employees worked for absolutely free for one solid year what net affect that would have on the bottom line, with everything being status quo? I really wonder if then U would make a substantial profit. I bet if they did show a profit it wouldn't set off fire works on wall street.

Giving more concessions is a vain attempt at putting humpty dumpty back together again, it's wishful thinking at best. Terribly short sighted by the people who should know better and are the same ones who will decide what course this anemic dog should take.

Unless and until sanity is restored in pricing, this cutthroat mentality will assure the demise of a few carries, it only makes sense. I am afraid the writing is on the wall folks, U’s over the horizon radar is coming up with a blank picture.

 

[SVQLBA]

Good Post because this rings so true!


Unless and until sanity is restored in pricing, this cutthroat mentality will assure the demise of a few carries, it only makes sense.

Problem is, the pricing is "sane" -- at least the average yields (ticket prices) being set by the LCCs, because its at a level that customers perceive as the value of the service they get. What is insane is still the legacy carrier pricing structure that only AWA has fully ditched, and US is in the process of ditching, kicking and screaming.

 

[RowUnderDCA]

Actually, I am interested to hear what capacity cuts the analyst is referring to? Where is US cutting capacity?

Isn't the analyst anticipating unannounced cutbacks, perhaps involuntary cutbacks?

 

[RowUnderDCA]

Problem is, the pricing is "sane" -- at least the average yields (ticket prices) being set by the LCCs, because its at a level that customers perceive as the value of the service they get. What is insane is still the legacy carrier pricing structure that only AWA has fully ditched, and US is in the process of ditching, kicking and screaming.

You know, in the past, I've sort of defended U's attachment to its pricing structure, because of U's RASM premium, but in a recent AvDaily (Tuesday), it published market share and average fare data for PHL-PHX and despite the fact that U had the higher market-share for the 4Q 2003, HP had the higher average fare, by a bit. So, maybe U can make more money by 'simple-pricing.' But I maintain that's because the revenue picture has changed rapidly and management's thought and analysis process hasn't caught up? hmmmm...

 

[ktflyhome]

What's up with the purple lettering,Cav. Feeling whistful these days??