Company Watch August 2005.


Katrina forces airlines to cancel flights; airports halt operations. Several airports stopped operating Monday, and airlines canceled flights as Hurricane Katrina hit the Gulf Coast. The storm also caused a spike in oil prices, which could push costs up for the airlines. United Airlines, American Airlines and Continental Airlines were among the carriers canceling flights. Airlines expect delays and cancellations related to the storm to continue through the week. Aug 30, 2005

Hurricane may send airline fuel prices soaring: Hurricane Katrina could push fuel costs higher for the airlines, analysts say. Airlines do not yet know how high prices will climb. "Jet-fuel prices are crushing, and could prove to be a knock-out blow for some," said John Heimlich of the Air Transport Association, in a recent report on fuel prices.

Aug 30, 2005

Storm may stall jet fuel deliveries: Airports and airlines are concerned that Hurricane Katrina might interrupt or delay deliveries of jet fuel. Oil refineries were shut down ahead of the storm, and analysts say

it could be weeks before some reopen. Air Transport Association spokeswoman Victoria Day said it is too soon to tell how the jet fuel supply will be affected, but she noted that the impact will be negative. Aug 30, 2005

France proposes airline tax to fight global poverty. French President Jacques Chirac said France will tax airlines starting next year and use the proceeds to fight global poverty. France chose airline tickets to tax in part because airlines benefit from globalization and paid low tax rates. The International Air Transport Association has criticized the proposal. Several countries are still debating the idea, and France is launching the pilot program to prove the idea can work. Aug 30, 2005

Hurricane cuts jet fuel supply 13%; fuel shipped to airports. Some airports ran low on jet fuel and airlines canceled hundreds of flights in the aftermath of Hurricane Katrina. The storm damaged refineries on the Gulf Coast and cut the supply of jet fuel in the U.S. by 13%, according to the Air Transport Association. Jet fuel is being shipped by air tanker to airports in Charlotte, N.C., Fort Myers, Fla., and West Palm Beach, Fla. Some analysts say the fuel shortage could push some carriers into bankruptcy. Aug 30, 2005

Wright Amendment stifles airline industry: The Wright Amendment is one example of how government is too protective of the airline industry, according to this Los Angeles Times editorial. Wright, which limits flying out of Dallas Love Field, costs California millions in lost economic activity each year, according to the editorial. The government has also hurt the industry by allowing bankrupt carriers to continue to operate without paying their bills. Aug 29, 2005

Lenders offer bankrupt United Airlines $3B in financing. Four banks have offered to provide $3 billion in financing to United Airlines, the carrier said. The financing would help the airline exit bankruptcy by early 2006. The lenders had offered to provide $2.5 billion to United. The increase reflects updates to United's business plan, which now includes more labor-cost cuts. Aug 26, 2005

The battle for Europe's low-fare flyers. Europe's low-cost airlines have grown at a tremendous rate in recent years as attractive ticket prices incited more people to fly. Now, however, many of the Continent's main markets are becoming saturated, and competition is heating up among low-cost rivals, charter carriers, and traditional airlines. Low-cost airlines must trim costs as well as find new sources of revenue to ensure continued growth and to survive a coming period of consolidation. Traditional carriers must also lower costs, but to hang on to their lucrative business customers they must ensure that higher ticket prices correspond to significantly better service than the economy-class. Aug 24, 2005

Soaring oil could push large carrier out of business, report says. Soaring oil prices could eventually send one of the large airlines out of business or force the industry to restructure itself, writes The Wall Street Journal's Scott McCartney. The effect of oil prices, which recently topped more than $67 a barrel, may get worse after the Labor Day holiday, when passenger traffic typically declines. Aug 23, 2005

Airlines will pay less for insurance this year, observers say. Aviation insurance premiums are expected to decline this year because the U.S. commercial aviation industry has experienced one of its safest periods in history. The industry has not recorded a major accident since late 2001, when an American Airlines flight crashed in New York. Recent crashes in Toronto, Greece and Venezuela will not boost rates for U.S. carriers, one observer said. Aug 23, 2005

Labor relations shift for airlines, unions. Extended labor disputes are occurring less frequently in the airline industry, industry observers say. The industry experienced just four strikes in the past 10 years, compared with 33 strikes between 1976 and 1985. The change reflects shrinking union membership, the political prominence of Republicans, and financial instability within the airline business. Aug 22, 2005

Soaring oil prices stall airline recovery. Record oil prices are preventing U.S. airlines from recovering from a financial slump. Most U.S. airlines continue to post large losses despite cuts in labor costs and an improvement in the U.S. economy. The cost of jet fuel has doubled in some markets. Legacy airlines face stiff competition from discounters and are reluctant to pass all of the increase on to consumers. Aug 18, 2005

Government should change approach to airline industry. The federal government should reform the way it regulates the airline industry, writes Paul J. Gessing, director of government affairs for the National Taxpayers Union. He cites United Airlines' decision to turn $9.8 billion in pension obligations over to the government's Pension Benefit Guarantee Corp. Additionally, the government should allow a private company to manage air traffic control services, he writes. Aug 16, 2005

Catering firm also faces trouble in U.S.. Problems surrounding catering firm Gate Gourmet are not isolated to the U.K. Gate Gourmet, based in Reston, Va., and Zurich, is involved in labor disputes in the U.S. as it tries to cut $42 million in annual costs. Thousands of travelers were stranded at London's Heathrow Airport last week when airline workers walked off the job in sympathy with Gate Gourmet employees. Negotiations between the company and unions resumed Monday. Aug 16, 2005

Oil prices touch new record at $66.11 a barrel. Oil prices reached a new record of $66.11 a barrel Friday. Some energy brokers expect prices to climb higher as suppliers struggle to meet the surging demand for oil created by the U.S. economy. Aug 15, 2005

Airlines lift prices to combat higher fuel costs: Most major airlines lifted fares over the weekend by up to $10 on one-way tickets. The carriers hope higher ticket prices will help ease the burden of soaring fuel prices. Oil prices touched a record high last week. Aug 15, 2005

Fuel costs erode profits. Despite more passengers taking to the air and flying more miles on average, the high cost of jet fuel contributed to a $3 billion net loss for airlines in the year's first quarter, said Jim Corridore, airline equity analyst at Standard & Poor's. Fuel prices stand at an all-time high of $1.43 a gallon, 75% higher than 2000 and 36% higher than 1981, the previous peak. Aug 12, 2005

Some airports feeling squeeze of jet-fuel shortages. Sharp spikes in jet-fuel prices recently sent airports in Arizona, California, Florida and Nevada scrambling to ferry in fuel from other markets and locations, which experts say is a short-term fix for an underlying problem. Aviation travel has increased beyond Sept. 11, 2001, levels, and the industry is outgrowing the infrastructure that supports it. Glenn Hipp, Southwest Airlines' director of fuel purchasing and inventory management, said late July and early August were "unprecedented for Southwest for the number of cities where we've had to manage supply problems." Aug 11, 2005

Government lawyers: Connecting passengers don't enjoy constitutional protection. The U.S. government is defending its actions in a case where it detained a Canadian passenger making a connecting flight in a U.S. airport and then later deported him to Syria so he could be tortured. Government lawyers argued such passengers are outside the protection of the U.S. Constitution because anyone presenting a foreign passport in order to make a connecting flight on U.S. soil is technically seeking admission to the U.S. and may be denied such admission, along with the protection afforded them under the Constitution. Aug 10, 2005

Avoiding plane repossession, judge allows United to buy debt. United Airlines avoided a possible repossession of 14 of its aircraft, gaining approval from bankruptcy court Monday to buy $293 million in senior debt. The company will now be able to refinance its debt on the airplanes and lower its payments in an effort to restructure the jet leases. Aug 9, 2005

Jet fuel prices surpass crude oil. Refiners are using tight fuel supplies and soaring crude-oil prices to increase their margins earned from turning oil into jet fuel, for which airlines are having trouble paying the price. The widening gap between crude oil and jet fuel has more than quadrupled to $11 per barrel so far this year compared to the $2.59 per barrel average in 2002. Aug 9, 2005

Airlines recover service since attacks, but gains are uneven. The airline industry has staged an uneven recovery from the Sept. 11, 2001, terrorist attacks, according to an analysis by USA TODAY. The South has fared best in regaining service since the attacks, and the Midwest is down the most. The study also found that while the amount of air service is catching up to pre-Sept. 11 levels, the number of seats still lag behind. Aug 2, 2005


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