Tue, Nov 04, 2008
Lower Fuel Prices, Cutbacks Expected To Lead To 2009
Profits
All the measures taken by the US
domestic airlines to cope with the fuel crisis have had an
unexpected benefit. Industry observers now say now that oil has
fallen in half since its summer peak, the airlines are
well-situated to withstand a drop in demand due to the slumping
economy.
The Financial Times reports the biggest US airlines stand to
return to profitability next year, just a few weeks after even
legacy carriers such as American Airlines and United Airlines were
on a deathwatch.
The paper notes corporate and consumer confidence has plummeted,
but industry execs say they're prepared for the worst. In
particular, Northwest Airlines says the worst economic slowdowns on
record have cut revenue by no more than 1.2 per cent.
Some investment analysts are actually coming out bullish on the
industry. Ray Neidl, an analyst at Calyon, has raised his rating on
seven major US airlines to "add" status.
"...They have put themselves in a good position to come through
the economic downturn without bankruptcies and then be able to take
advantage of the recovery, most likely in the spring," Neidl
said.
Doug Parker -- CEO of US Airways, another carrier some had
written off for dead earlier this year -- says he's also confident.
"We've got ourselves well-positioned to navigate through this," he
said. "The run-up in oil forced the industry to restructure around
a much different world."
Michael Levine is a former airline exec who now teaches at New
York University’s School of Law. He cautions against any
assumptions that fuel prices will remain low. Other industry
observers say airlines competing against the combined Delta and
Northwest could struggle, and that some carriers still need to
raise cash.
May you live in interesting times...
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