Aviation Conspiracy: Wild Ride For Airline Stocks!!!
Bill Mulcahy
http://pages.prodigy.net/rockaway/newsletter502.htm
Aviation Conspiracy Newsletter
#502...........................................................................................Oct
17, 2008 Past newsletters can be accessed at:
http://pages.prodigy.net/rockaway/ACNewsmenu.htm If you want to get the
newsletter sent to you every week, sign up to AviationWatch. Bill Mulcahy
rock...@prodigy.net
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Quote of the Week: "He never stops, every day and night, even at weekends."
from a news story this week on England's most active environmentalist who is
fighting Heathrow Airport expansion, John Stewart
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Wild Ride For Airline Stocks!!!
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As Bill Sees It (Editorial): How Many Airlines Will Bite The Dust? How will
the airlines survive the drastic stock market decline? Some say they will
weather it because the price of oil is down. However, the reason the price
of oil is down is because people aren't traveling. With the economy in the
toilet it may mean that even more people can't afford to travel, especially
by air. Already there are signs of collapse. Southwest Airlines Co. reported
its first quarterly loss in 17 years. So whatever profits the airlines make
from lower oil prices may be wiped out. Unfortunately, as we have seen in
the past when an airline goes under it doesn't mean any relief for aviation
noise victims as the failed airline gets gobbled up by a larger, more
financially stabile airline which "usually" continues the failed airline's
operations. They do, however, sometimes cut the flights from unprofitable
airports, usually in small cities. Oh, by the way, OPEC is meeting next week
to discuss cutting oil production to drive prices back up.
England's Anti-Aviation Noise Activist Named As Number One
Environmentalist!!! England's Independent newspaper selected John Stewart,
founder of the anti-airport expansion group, HACAN, as the number one
environmentalist on their list of 100 environmentalists in the UK. Its too
bad we don't have newspapers doing a similar thing in the United States. But
then again they would be too afraid of alienating their airline advertisers
to ever select anyone fighting airport expansion.
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Sidney, Australia: Airport "Safety" Extension Means More Noise For
Residents!!! Residents living under Sydney Airport's north-south runway
flight path face more noise as a larger runway safety area is constructed.
The construction program for the safety area at the western end of the
east-west runway was approved by the federal government in August following
an extensive program of public consultation. The larger runway safety area
is a mandatory safety requirement set by the Civil Aviation Safety Authority
(CASA) and meets international aviation standards. It is designed to protect
passengers in the event that an aircraft overruns or lands short of a
runway. Sydney Airport chief executive Russell Balding said construction
made the east-west runway available for noise sharing and during high
crosswinds. There would be no change to the airport curfew and cap of 80
aircraft movements per hour. "Sydney Airport apologises to people who will
be affected by this vital runway safety project, but it is essential that we
comply with the Australian government's air safety regulations," Mr Balding
said in a statement. The first phase of construction should be completed by
mid-June 2009 when restrictions on the use of the east-west runway will be
eased.
http://www.smh.com.au/news/national/things-are-about-to-get-noisier-in-sydney/2008/10/12/1223749830775.html
Aviation Noise Activist, John Stewart, Named As England's Number One
Environmentalist!!! Where would you expect to meet a man described by an
awe-struck fellow campaigner as "one of the great eco-warriors of our age"?
Swinging through the rainforest, maybe? Riding the bows of a boat into
battle against whalers? Not eating a sandwich in a very dull hotel on the
edge of Heathrow. But there he is, John Stewart, the most influential
environmental activist in Britain, revealed today to be top of The
Independent on Sunday's Green List. Step aside, Prince Charles. Make way Zac
Goldsmith. Bow down Joss Garman, co-founder of the direct action group Plane
Stupid, who gave the quote above and says of Stewart: "He is a total hero of
mine, an absolute inspiration to the movement as a whole." Now Stewart seems
on the verge of another victory, this time against expansion at Heathrow - a
cause that has occupied almost his every waking hour for the past decade. It
has made his social life "a disaster" and kept him poor and single. Heathrow
is also what landed him on the front pages and in the High Court two summers
ago, when the airports operator BAA tried to ban sympathisers from joining
the climate camp on the perimeter. It succeeded only in obtaining an
injunction against the three people it felt most threatened by - one of whom
was John Stewart.
http://www.independent.co.uk/news/people/john-stewart-a-oneman-ecoindustry-958712.html
http://www.treehugger.com/files/2008/10/top-environmentalist-john-stewart.php
Airline Stocks Take A Wild Ride!!! ATLANTA (AP) - Airline shares and oil
prices used to move together like kids on a teeter-totter, with one rising
while the other falls. But the financial crisis affecting the U.S. and other
countries has thrown that conventional wisdom out the window. Investing in
airlines for the long-term can be a risky and not always rewarding
proposition, as four major U.S. carriers have filed for bankruptcy
protection since 2002, wiping out their pre-Chapter 11 shares in the
process. Fort Worth, Texas-based AMR Corp., parent of American Airlines,
which avoided bankruptcy, has not paid a dividend to common shareholders
since 1980, a spokesman said. For much of the third quarter, some short-term
investors were able to make money from big swings in airline shares that had
more to do with the price of oil than the fate of Wall Street firms. But the
broad reach of the financial crisis may have severed that connection. "In
the past two weeks, it's a different story," Calyon Securities airline
analyst Ray Neidl said. "The credit markets are affecting the overall market
and that's what is affecting everyone and what the impact will be for
airlines in terms of demand." As oil prices plunged about 38 percent from
around $147 a barrel on July 11 to around $91 a barrel on Sept. 16, shares
of the big six legacy carriers soared - in Tempe, Ariz.-based US Airways
Group Inc.'s case, its stock more than quadrupled over that period. The Dow
Jones industrial average was nearly unchanged. From that point through
Wednesday, oil prices fell another 2 percent to around $89 a barrel, but
shares of the six airlines sank - in the case of Chicago-based UAL Corp.,
parent of United Airlines, its stock shed more than half its value over the
three-week period. The Dow, meanwhile, fell about 1,800 points, or roughly
16 percent. "The old saying is, 'You can't fight the tape,' and that's what
airline stocks are up against right now," Neidl said.
http://ap.google.com/article/ALeqM5jGejPPqnMpaA-nyDFDBFgQuLiGEwD93NDM7G0
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Important Aviation
News Stories This Week
Southwest, Continental report third-quarter losses
By DAVID KOENIG - 6 hours ago
http://ap.google.com/article/ALeqM5g2bF4eYrvgSoKQbL-7Sf8bXrxkwwD93RP4900
DALLAS (AP) - Southwest Airlines Co. reported its first quarterly loss in 17
years, and Continental also lost money because of high summer fuel costs,
but airline executives said Thursday they are more worried now about a
looming recession.
The reports told a story of good and bad news - fuel prices are finally
falling, but so is the economy and with it, the ability of people to travel.
"We know that demand for air travel will be adversely affected by a
recession," said Lawrence Kellner, the chief executive of Continental
Airlines Inc., "and it remains to be seen how deep, wide and long the
recession will be."
Despite the losses, Continental and Southwest both beat Wall Street's dire
expectations and - helped by falling oil prices - airline stocks soared.
The two reports came a day after Delta Air Lines Inc. reported losing money
during the busiest travel season of the year, and American Airlines parent
AMR Corp. said it would have too without the sale of an investment business.
The airlines spent much more on fuel than they did in last year's third
quarter, but executives cheered the sharp decline in fuel prices since
hitting record highs in early July. Southwest said it expected prices to
fall even more in the fourth quarter.
But airlines are worried that they are merely trading one big problem for
another, as global financial markets sag and indicators point to recession
in the U.S.
"The main thing now is the recession and the impact on travel demand," said
Southwest CEO Gary Kelly. "We haven't seen any impact yet. My biggest
concern now is January."
Continental executives said they were already seeing financial, auto and
pharmaceutical companies cutting back sharply on travel and forcing
employees to fly in coach instead of first class.
AMR and Delta officials said Wednesday they were also seeing a drop in
demand even on previously strong international routes.
The financial performance of airlines usually tracks the economy very
closely. Kelly and Kellner held out hope, however, that the coming recession
won't be as hard on airlines because the industry has already cut flights
sharply, before travel demand falls.
Even Dallas-based Southwest expects to cut capacity 5 to 6 percent in the
first quarter of next year. CEO Kelly could not remember the airline ever
doing that before.
Southwest lost $120 million in the third quarter due to $247 million in
charges, mostly due to writing down fuel-hedging contracts that are less
valuable now that oil prices have plunged more than half since July.
Without the write-down and other charges, Southwest said it earned an
operating profit of $69 million, or 9 cents per share, which was 2 cents per
share better than Wall Street expected, according to a survey of analysts by
Thomson Reuters.
Revenue rose 11.7 percent to $2.89 billion, beating analysts' forecast of
$2.83 billion.
Southwest has been more successful than any other airline at hedging against
high oil prices. It buys options to lock in fuel at set prices, a strategy
that has saved it several billion dollars this decade.
But accounting rules require Southwest to constantly update the potential
value of some of those contracts, and their value tumbled as oil prices
fell.
Southwest also disclosed Thursday that it tapped $400 million from a bank
revolving credit account, which Kelly said would go to next year's capital
spending. Chief Financial Officer Laura Wright said Southwest would need to
raise "a few hundred million dollars" more as collateral against fuel hedges
if oil prices fall another $20 - to around $50 a barrel.
Some of those fabled hedges are now under water, because they anticipated
oil at more than $90 a barrel, and Southwest is now unwinding some of them,
Kelly said.
Still, Kelly said cheaper oil is good for Southwest. It paid $2.44 a gallon
for fuel in the third quarter and expects to pay $2 a gallon in the fourth.
Continental swung to a loss of $236 million, or $2.14 per share, in the
third quarter, as fuel costs jumped 68 percent to $1.5 billion.
Excluding charges such as severance costs - the airline is cutting 3,000
jobs - Houston-based Continental's loss would have totaled $1.32 per share.
That handily beat analysts' forecast of a loss of $1.55, according to a
Thomson Reuters survey.
Revenue rose nearly 9 percent to $4.16 billion, beating analysts' $4.11
billion prediction.
Continental said it delayed delivery of two Boeing 777 jets from next year
into 2010, and will delay 16 narrow-body planes from 2009 and 2010 into 2011
and beyond.
JPMorgan analyst Jamie Baker discounted the third-quarter results. He said
they did not reflect the further drop in fuel prices, the effect of airline
capacity reductions (which started late in the quarter) and the impact of
the global economic "malaise."
Airline stocks soared Thursday as oil prices plunged again, below $70 a
barrel.
In afternoon trading, shares of Continental jumped $2.34, or 18.2 percent,
to $15.18; Southwest shares gained 48 cents, 4.2 percent, to $12.04; AMR
shares rose $1.40, or 16 percent, to $10.18; and Delta shares were up $1.14,
15.3 percent, to $8.58