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Posted
May 06 2008, 06:14 PM
by
Charley Blaine
Rating:
I'm really not here to scare you, but, get ready, I AM going to scare you.
The news got lots of attention: Goldman Sachs analyst Arjun Murti predicted Tuesday that the price of crude oil could hit $150 to $200 a barrel in six to 24 months. (Here's one discussion of the report. Another is here.)
Crude oil in New York promptly jumped to as high as $122.73 a barrel in New York before closing at $121.84. And, as I write this, crude was trading slightly lower in electronic trading. But it also had the perverse effect of pushing the stock market higher. Indeed, the biggest winners in Tuesday's stock market were oil and gas production companies, natural gas companies. (But not refiners; crude oil is rising faster than refiners can push their prices up.)
So, if crude jumps to $150 or $200, how does that translate into prices at the gas pump. Here's the scary part.
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Posted
Apr 23 2008, 05:15 PM
by
Matt Koppenheffer
Rating:
Airlines, ugh! what a lousy investment they've been recently. Is there a better way?
After managing to hit $40 per share back in early 2007, AMR, the parent of American Airlines, has plummeted over 80%. UAL, United's parent, peaked at $50 right around the same time and has since fallen to $13. Continetnal? Ditto. US Air? Ditto. I'm sure Delta would have taken a similar kamikaze dive too, but it didn't emerge from bankruptcy until midway through 2007. Everybody's airline sweetheart Southwest has held up a bit better, but even it's down nearly 30% over that timeframe.
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Posted
Apr 10 2008, 01:10 PM
by
Robert Walberg
Rating:
In the words of Ricky Ricardo, the CEO of AMR Corp. has "some 'splainin' to do." Whether you believe the parent of American Airlines is merely the victim of a reactionary FAA or not, the fact of the matter is that management had 18 months to comply with the FAA's request regarding the wiring on the MD-80s and failed to act.
Yes, the planes have been flying safely for years, and yes, the FAA is likely overreacting to criticism from Congress after it was made to look inept in the Southwest Airlines debacle a few weeks back. Nevertheless, the single most important task of any airline CEO is public safety. Failing to address a potential safety risk merely because you didn't think you would get caught is a miserable excuse.
Maybe AMR's management simply thought the cost of fixing the problem would be too high -- especially since the FAA really hadn't checked that carefully in the past. With jet fuel costs skyrocketing and the economy slumping, spending more money on maintenance that didn't seem necessary had to be a tough pill to swallow. So AMR chose not to take its medicine in small manageable doses over the past 18 months in hopes that the problem would just go unnoticed.
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Posted
Apr 03 2008, 02:17 PM
by
Matt Koppenheffer
Rating:
If you need proof that it's a tough time to be in the airline business, just ask the folks at ATA. After filing for Chapter 11 bankruptcy protection earlier this week, the airline bowed out completely after it lost a key contract.
Not enough proof? You can also talk to Aloha Airlines. On Monday, the Hawaiian airline also shut the cockpit door -- so to say. The sad message on its website simply reads: "Sorry... After more than 60 years of serving Hawaii Aloha Airlines is no longer operating."
What of the rest of the bunch? On Thursday Glenn Tilton, the CEO of United Airlines parent UAL, was talking up the need for industry consolidation, particularly in the face of $100 oil. Tilton was quoted as saying "The case for change including consolidation was compelling a year ago and has to be more so today." That could also probably be rephrased to read, "We really don't want to go bankrupt... again."
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Posted
Mar 11 2008, 08:53 AM
by
Douglas McIntyre
Rating:
Several companies in the airline and auto sectors could face bankruptcy this year with American Airlines and Ford at the head of the list
American Airlines dropped 10% yesterday to hit $10.20. The shares have not been at that level since 2004. American lost money three of the last five years. It had a small net profit in 2007 of just over $500 million on $22.9 billion in revenue. The margin is razor thin.
In 2007, American also had interest expense of over $900 million. Long-term debt is about $9.4 billion.
In an industry which is as well-known for its bankruptcies as it is for its bad food, 2008 is shaping up as a truly awful year. Fuel prices are rocketing as oil passes above $107 a barrel. The recession is likely to put a drag on passengers, both business and pleasure. The $500 million that American made last year could turn to a loss of several billion in the blink of an eye.
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Posted
Feb 26 2008, 02:24 PM
by
Matt Koppenheffer
Rating:
The other day I noted the wrench that airline pilots had thrown in the plans for Delta and Northwest to merge. It appears today that the potential tie-up has come to nearly a complete stop as an internal Delta memo drew a line in the sand as far as what the company sees necessary for a deal to work.
According to The Wall Street Journal, the memo was signed by both Delta's CEO and CFO and said that keeping the airline based in Atlanta and maintaining seniority for all of its employees were requirements for any deal to move forward. Outside of those conditions being met, Delta plans to continue to focusing on making it as a stand-alone airline.
What's yet unclear is the real meaning of the memo. Given the fact that this supposedly internal memo got leaked, I can't help but wonder if it's simply a pressure tactic by Delta in an attempt to get Northwest to bow to its demands. Neither company is currently in an overly conservative financial position, but many think that a combined entity could take advantage of economies of scale that would help combat high oil prices and heavy competition from discount carriers.
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Posted
Feb 22 2008, 01:32 PM
by
Matt Koppenheffer
Rating:
For a few weeks now, Delta Air Lines, the third-largest U.S. airline by traffic, and Northwest Airlines, the fifth largest, have been in talks to combine. The combination would create a new leader in U.S. air traffic and hopefully give the combined company significant synergies and economies of scale.
The negotiations have hit a bit of a snag though, as pilots have been unable to come to an agreement about how the seniority list of the new company would look. According to The Wall Street Journal, this list dictates everything from how much the pilots are paid, to what kinds of planes they fly and when they get time off. Though the hitch could be resolved, The Journal cited unnamed sources as saying the deal could be called off if an agreement isn't reached soon.
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Posted
Jan 12 2008, 01:56 PM
by
Douglas McIntyre
The market is betting that one or two mergers will save air carriers like United, Delta, and Northwest from high fuel costs and a flagging economy.
Since 2002, Delta, Northwest, and US Air have all gone into Chapter 11. Go back a little more than a decade and the list expands to Braniff, Eastern, Midway, TWA, and Pan Am. The market respects no airline icons.
The carriers that are gone, bankrupt or sold, went out of business due to three things: high labor, high fuel, and downturns in the economy. Labor unions have been beaten to a pulp. The other two forces are still in effect.
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Posted
Nov 02 2007, 02:11 PM
by
Matt Koppenheffer
Rating:
It's been a challenging decade for the airlines. The 2001 terrorist attacks body slammed the industry, employee relations have been less than stellar as they try to cut costs, and the seemingly unstoppable price of oil continues to crimp business. American Airlines and Delta just pushed through some price hikes aimed at offsetting the rocketing price of jet fuel, and United and Southwest did some of the same last month.
For investors, the question is whether there is opportunity to be found in the face of these headwinds. On The Motley Fool's CAPS service, players are split on the prospects for Southwest, a long-time favorite among investors. Though there are fair number of Southwest bulls, the stock has just a two star rating -- suggesting that it's not among the best investment opportunities in the 5,000-stock CAPS universe.
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