Airline Results First Quarter 2011

Delta = -$318 million
United = -$136 million
U.S. Airways = -$110 million
American = -$436 million
Alaska = $29.5 million
Southwest = $5 million
Jetblue = $3 million


Crude oil.  I hate you.

Today oil speculators have the price of a barrel of oil marked at $112.35.  This is the principle reason that the larger major airline carriers in the country are all reporting multi-million dollar losses for the first quarter of 2011.  Congratulations to Alaska Airlines for posting the highest profit of the quarter!  That is good to see considering my company, Skywest, entered into a flying contract with Alaska beginning in a few weeks.

You can expect ticket prices to increase this summer in the form of a "fuel surcharge."  I hate that this is they way airlines choose to market the price increases.  I would rather the ticket price just go up without the explanation. Then the airlines could slowly bring the prices back down instead of dropping the extra fee all at once when people don't think they should be paying a fuel surcharge anymore.  The problem is airlines should continue to charge extra even if oil prices decrease in order to make up for the huge losses.

I read that President Obama has ordered the U.S. Justice Department to open a probe to examine the role of traders and speculators in oil markets and how they contribute to the skyrocketing fuel prices.  It is possible that a few people are dishonestly becoming very rich at everyone else's expense.  What many don't understand is the price of a barrel of oil is not how much it is actually costing at this moment.  The majority of our oil is priced by "speculation"  Gas companies charge more NOW in order to pay for the price of their next delivery of gasoline because SPECULATORS say that the price of a barrel has gone up due to this and that, etc....

I believe the airlines have figured out pretty well how to be profitable at around $100 to $120 per barrel of oil.  The first quarter is always the weakest and typically shows a loss.  The annual results are made up in the second and third quarters.  But if oil creeps over $120 per barrel and stays there that is bad for everybody...