FuelClub Discount

The airline, 75 per cent-owned by the Government, yesterday reported an annual net profit of $218 million, off 1 per cent on the 2007 year. Trading turnover rose 9.1 per cent to $4.667b.

A final 3.5c dividend increases the annual rate from 8c to 8.5c a share, excluding 2007’s special 10c dividend. The gross dividend yield of 12.686c gives a yield of 10.6 per cent, based on yesterday’s closing share price of 120, down 2c.

Chief executive Rob Fyfe said the volatility in fuel prices and uncertain economic conditions had made it difficult to accurately forecast a profit for next year. But the average cost of jet fuel would need to be below $US140 a barrel for the 2009 financial year for the airline to be profitable, he said.

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Not long ago LA/Ontario International Airport was setting growth records. Airlines flocked to the Inland Empire airfield in what Los Angeles Mayor Antonio Villaraigosa hailed as the “great first steps” to regionalizing air travel in Southern California.

In a much publicized event last year, the mayor even helped welcome the start of an airline’s service at Ontario by donning a safety vest and directing an ExpressJet plane to its gate.

Come September, ExpressJet will no longer operate at Ontario, becoming one of the latest casualties of high fuel costs and a souring economy, which have grounded airline service across the country. Other domestic airlines, such as United, Delta, Southwest and JetBlue Airways, have slashed or eliminated service at Ontario as well.

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U.S. airlines are cheering a steep decline in the price of jet fuel since mid-July, when crude oil began a nearly $27-per-barrel descent, but that good news may come with a slight sting for carriers that locked in fuel prices when oil was at its peak.

The risk is that oil may drift below the current price airlines guaranteed with hedging contracts, which are usually options. If that happens, the hedges carriers purchased could be a waste of money.

Worse yet, it is possible some airlines could be committed to paying more for their fuel than market prices.

“Given some of the hedging mechanisms they are using, they are going to be subject to significant losses on those portfolios. We’ve never seen such volatility on oil prices,” said Brian Nelson, equity analyst at Morningstar.

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Delta Air Lines’ much publicized Salt Lake City-to-Paris flight has run into unexpected turbulence since it was launched earlier this month.

At least twice since the the inaugural flight on June 3, the “nonstop” route has included stops in Cincinnati to take on additional fuel to make it across the big pond.

You can blame the one-stop affair on Utah’s hot weather, the popularity of the flight and technical difficulties that forced Delta to use Boeing 767-300 jumbo jets with different sized engines than would normally be used on the route.

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US Airways said it is canceling the leases on aircraft scheduled for delivery, charging for checked baggage, introducing a new in-flight beverage program and increasing fees associated with employee guest and parent travel programs.
“Our industry is profoundly challenged by the dramatic increase in fuel prices, and we must write a new playbook for running a profitable airline in this new and challenging environment,” Chairman and Chief Executive Doug Parker said in a news release.

The airline said jet fuel costs have nearly doubled in the past year, driving up annual energy expenses by $1.9 billion. The company reported a profit of $427 million last year. But fuel now accounts for 39% of total expenses; it was 14% in 2000.
Roughly 300 pilots, 400 flight attendants, 800 airport employees and 200 staff members will be eliminated from the company’s ranks, US Airways said.
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American Airlines on Wednesday raised its fuel surcharge by $20 per round trip, after a failed attempt to raise fares, according to reports.

Spokesman Tim Wagner said the surcharge would apply on domestic routes except those where the carrier competes with low-fare airlines.

American, a subsidiary of Fort Worth, Texas-based AMR Corp. (NYSE: AMR), and several other airlines attempted to raise fares by $20 over the weekend, but failed as some carriers didn’t match the increases.
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