Airline CEO letter RE:Oil Futures

[FLYTPAY]

I got this email from Delta today on behalf of all the below 12 airline CEO's. Pretty outrageous and lacking of economic insight for an industry with so many economic variables.

[FONT=Tahoma, Verdana, MS Sans Serif]Hello Mr. FLYTPAY, [/FONT]<IMG height=8 alt="" width=20> <IMG height=8 alt="" width=20>[FONT=Tahoma, Verdana, MS Sans Serif]Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now. [/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers. [/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation. [/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs. [/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper. [/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]The nation needs to pull together to reform the oil markets and solve this growing problem. [/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]We need your help. Get more information and contact Congress by visiting www.StopOilSpeculationNow.com. [/FONT]
<IMG height=8 alt="" width=20> <IMG height=8 alt="" width=20>[FONT=Tahoma, Verdana, MS Sans Serif]Richard Anderson
CEO
Delta Air Lines, Inc.[/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]Gerard J. Arpey
Chairman, President and CEO
American Airlines, Inc.[/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]Bill Ayer
Chairman, President and CEO
Alaska Airlines, Inc.[/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]Dave Barger
CEO
JetBlue Airways Corporation[/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]Mark B. Dunkerley
President and CEO
Hawaiian Airlines, Inc.[/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]Robert Fornaro
Chairman, President and CEO
AirTran Airways[/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]Timothy E. Hoeksema
Chairman, President and CEO
Midwest Airlines[/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]Lawrence W. Kellner
Chairman and CEO
Continental Airlines, Inc.[/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]Gary Kelly
Chairman and CEO
Southwest Airlines Co.[/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]Douglas Parker
Chairman and CEO
US Airways Group, Inc.[/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]Douglas M. Steenland
President and CEO
Northwest Airlines, Inc.[/FONT]
[FONT=Tahoma, Verdana, MS Sans Serif]Glenn F. Tilton
Chairman, President and CEO
United Airlines, Inc.[/FONT]

 

[WIDGET]

i just got that email as well. there's a link to email or send a pre-written letter to congressmen. are there miltary "rules" about emailing senators and what-not?

 

[A4sForever]

Richard Anderson is a "Dick" .... trust me on this one.

 

[FLYTPAY]

i just got that email as well. there's a link to email or send a pre-written letter to congressmen. are there miltary "rules" about emailing senators and what-not?

You can contact any of your governmental leaders as a military member. You must give them the respect they are due of their position and you must not bring your military service and any partisan support/unsupport together. I emailed a congressman last month.

 

[incubus852]

I wrote the Military Officers Association of America regarding this matter once and they replied saying:

"As an active duty officer, you don’t give up the right to contact your elected representatives. The key is to stay away from defamatory language regarding your superiors (to include the President), your orders, assignments, etc.

However, asking questions and/or expressing your opinion about the war is still within your right as a citizen."

So pretty much what he said...

 

[Hozer]

Isn't speculating just going long (in this case)? People won't bitch when guys start shorting it...I don't think they are the problem...now Congress...

 

[FLYTPAY]

Isn't speculating just going long (in this case)? People won't bitch when guys start shorting it...I don't think they are the problem...now Congress...

You can buy an option on either side......the stupid statement is the one regarding the barrel of oil being traded up to 20 times, the consumer picking up the final tab, and the price per barrel being raised $30-$60 because of this. There are not 19 middlemen.

 

[WIDGET]

You can contact any of your governmental leaders as a military member. You must give them the respect they are due of their position and you must not bring your military service and any partisan support/unsupport together. I emailed a congressman last month.

I wrote the Military Officers Association of America regarding this matter once and they replied saying:

"As an active duty officer, you don’t give up the right to contact your elected representatives. The key is to stay away from defamatory language regarding your superiors (to include the President), your orders, assignments, etc.

However, asking questions and/or expressing your opinion about the war is still within your right as a citizen."

So pretty much what he said...

thanks a lot! that was very helpful!

 

[incubus852]

All this talk about speculation is unfounded. The simple fact is demand from developing countries such as China and India has increased exponentially in the past several years and we are now feeling the effects.

Airline CEOs and politicians can try all the magic they want; the simple fact is oil will only become more expensive. Sweet, light crude, the easiest to refine, has already peaked and now we're left with diminishing reserves and harder to refine heavier, sulphur-laden crude, oil shale and sands.

Congress has a large amount of persons who I wouldn't trust to take care of a geedunk, who are always looking for some easy out and a scapegoat to blame.

And this email sounds like a chain mail piece of crap. Just my two cents.

 

[FLYTPAY]

And this email sounds like a chain mail piece of crap. Just my two cents.

Not a chain. I received it from my frequent flyer number account.

 

[a2b2c3]

I always thought that the airlines just needed to get intelligent and realize that a $99 ticket from New York to LA is not the most cost effective way to do business. That and if you go to any smaller airports which are not hub links you always get screwed on the price as they try to compensate. They dug themselves their own grave here.

 

[A4sForever]

I always thought that the airlines just needed to get intelligent and realize that a $99 ticket from New York to LA is not the most cost effective way to do business.....They dug themselves their own grave here.

True ... true ... and all the while aided and abetted by an American traveling public which feels flying for next to nothing is the way it's done.

Welcome to the real world, folks. The party's OVER. It costs money to go from point A to point B. Too bad you're just now recognizing that you actually have to "pay for it", when for decades you've demanded and got it for less than cost.

 

[Catmando]

Airlines are an oligopoly. As such, their fare pricing is subject to what is known in economics as the “kinked demand curve.”

If one airline alone raises fares, it suffers a disproportionate loss in passengers, and revenue. But if an airline reduces fares, its passenger and revenue gains are minimal.

Thus, total airline fares are nearly always fixed, despite widely variable or even significantly rising costs. And since fare increases are mostly blocked by oligopoly’s economics, the way of least resistance is always the same fares or even lower fares, regardless of the airline's costs and profitablility.

In the recent past, airlines have been able to compensate for lower fares (and lower revenues) by aggressively increasing labor productivity and severely cutting employee's wages and benefits. But they have by now cut to the bone. Now, fuel is both the major and ever rising cost, of which airlines (if they haven't hedged) have no control.

Because of the industry’s kinked demand curve economics, while airlines may increase fares somewhat to compensate for the incredible increase in fuel prices, they will never increase them enough to compensate for their losses, because of oligopoly pricing pressures.

Airlines will continue to price their service below their costs (and lose massive amounts of money - and it will be ugly) until either the re-regulation of airlines, or more likely, until a number of carriers go out of business, and the industry can then change from oligopoly pricing, to monopolistic pricing…. and then only a few citizens will be able to afford to fly, just like in the days before airline deregulation. As A4s correctly says.........

(A4s) -"Welcome to the real world, folks. The party's OVER. It costs money to go from point A to point B. Too bad you're just now recognizing that you actually have to "pay for it", when for decades you've demanded and got it for less than cost."

 

[eddie]

Isn't speculating just going long (in this case)?

Yes.

Saying that speculators are driving up prices is like saying all if suddenly people started getting sick more often, because there are more doctors, they must be causing it.

Can't wait for somebody to win big on the oil short. Options are a BEAUTIFUL thing.

The only thing Congress can do (for PRESENT effect; ie drilling won't do crapolla but in the long term) is cut gas taxes...

 

[A4sForever]

…. and then only a few citizens will be able to afford to fly, just like in the days before airline deregulation.......

Ah yes ... pre-deregulation days ... when men were gentlemen and ladies were .... ladies.

And when the two would show up for a flight in coat/tie and a dress, respectively ...

Civilization.