Since 2004, the author has also written a similar aviation logistics surprise form in Logistics magazine. The first surprise in 2005, I named it: unequal sky-to illustrate the differences in different regional markets. That's true.
In 2004, the last issue of Businessweek believed that the whole aviation industry would have a prosperous year. But for those companies that are on the defensive in the competition, there is not much time left for them. This forecast is the most vivid statement I have ever seen about the American aviation industry in 2005.
This year, we saw that the soaring price of jet fuel made the poorly managed American airlines in an increasingly difficult situation, and the shortage of supply made the price growth rate of jet fuel even exceed that of crude oil. Hurricane Katrina severely hit the production of refineries in the Gulf Coast States of the United States, and the supply of aviation fuel was once tight. To some extent, this makes people ignore the fact that the North American business travel market is picking up.
Fuel cost is an important part of the operating cost of long-haul flights, so large international airlines are more affected than airlines flying short-haul flights. Although most airlines that use old-fashioned planes have recovered their costs, these planes consume more fuel than those that use new energy-saving planes. In addition, some airlines hedge the fuel cost, mainly by buying insurance policies from insurance companies, and locking the fuel price to be purchased in the future at the agreed low price. Airlines with large cash and light debt burden can hedge freely, which lasts longer than those without hedge funds.
Peter Morris, chief economist of Airclaims, believes that fuel has become a factor to distinguish the advantages and disadvantages of airlines. If it is in a very unfavorable position in fleet composition, fuel hedging or route network, it will be hit harder when fuel prices rise. Delta Air Lines and Northwest Airlines filed for bankruptcy protection, which is the best example.
They tried their best to avoid filing for bankruptcy protection before Hurricane Katrina. Their planes have been in service for a long time, with little or no cost hedging, and their costs and debts are high. Although airlines have amazing combat effectiveness, they also have good ways to persuade suppliers and lending institutions to provide them with more materials and funds. Can Northwest Airlines finally survive this protracted strike? For Delta Air Lines, its initial restructuring plan was based on the oil price of $42 per barrel. The company burned a lot of money in the second quarter, when it should have bought fuel to maintain its winter operation. To this end, it has been selling assets to raise funds.
In fact, established companies born before the deregulation of the aviation industry have been unable to cut huge costs such as pensions. Bankruptcy protection at least provides them with an opportunity to unload heavy financial burdens-labor costs, pension payment obligations and so on-at the door of the court. After a few months, pack light and simple, and then embark on a journey. At this time, we will have greater strength to face the impact of high oil prices and aggressive opponents. In addition, many established airlines "have used bankruptcy protection procedures to adjust their cost structure".
In this aviation crisis, low-cost airlines have the best chance of winning, including Southwest Airlines, JetBlue and AirTran Holdings in the United States. Ryanair in Ireland and EasyJet in Britain. The planes of these companies are all very new, and the cost is correspondingly low. Their flight routes are also relatively short, and they are supported by banks with strong financial resources. These favorable factors have prompted low-cost airlines to expand their strength in the face of bleak competitors shrinking their business.
Ryanair and EasyJet did not hedge their fuel costs too much, but they also benefited from the withdrawal of their rivals. Traditional European airlines charge fuel surcharges one after another, so those airlines that don't provide full service and don't charge fuel surcharges are much cheaper. In this way, they don't need to discount, and the increased income can offset the increased cost-Ryanair's profit reached a record level in the first half of the year, and announced plans to double its profit and passenger number by 20 12.
In Europe, the recent strong quarterly performance reports of Air France, British Airways and Lufthansa surprised investors. These stocks have also performed much better in recent months than the American Stock Exchange Aviation Classification Index. The summer demand and fare level in front of them exceeded the increase of fuel cost, partly because of the increase of fuel surcharge.