With Fuel Concerns Receding, Airlines Face Revenue Drop (AMR)(DAL)

The airline industry keeps drawing the short straw.

A year ago, the carriers were being pounded by high jet fuel price due to rocketing crude. Now the price of oil is down by 75%, and the cost of flying a plane is dropping.

Some analysts were concerned that several of the world’s largest airlines might not be able to avoid Chapter 11. Some smaller airlines and carriers in Europe did have to go into bankruptcy court. Northwest and Delta (DAL) merged to save costs. Other mergers were rumored.

The airlines have to face a problem which may take longer to resolve itself than the fuel crisis did. People are not flying. They are either staying at home, walking, or riding bikes.

According to The New York Times, economy class ticket sales dropped 6% in November. The more profitable premium tickets saw sales fall almost 11%. There is every chance that the trend continued in December, although the holidays may have helped. This month is almost certain to show another sharp drop as the recession bites harder.

Airline stocks have recovered nicely from their summer lows. The stock of AMR (AMR) dropped below $5 in July. It now trades at over $11. It won’t stay the high for much longer.

Douglas A. McIntyre