It is a B.S. article from a rather uneducated reporter in the back of the press conference room...The idiot reporter ran with it.
Oil @ 100$ a Barrel – A Frightening Thought
From
'USA Today'
The very thought of $100 oil
"makes me feel sick," says John Heimlich, chief economist at the US Air Transport Association, the airlines' trade group. He says oil prices that high could push one or two of his group's big member airlines into bankruptcy, with the most endangered solvent carrier being Houston-based Continental. And, he says, it likely would keep Delta and Northwest in Chapter 11 much longer than anticipated because it would be almost impossible in such market conditions to find investors to provide financing needed to emerge. Both airlines currently expect to exit bankruptcy in 2007.
Northwest officials declined to respond specifically to such suggestions. But in recent financial reports and news releases, Northwest officials have raised the possibility that the company may not be able to absorb escalating fuel costs.
Betsy Talton, spokeswoman for Delta, says high fuel prices
"do pose a risk to our plan" to emerge from bankruptcy in 2007.
"For 2006, we've seen a nearly $600 million impact from higher fuel prices."
Baggaley agrees that Continental is most at risk of entering bankruptcy protection if oil prices climb to three digits. Despite outperforming most other big carriers by several measures in the past couple of years, Continental has the smallest cash cushion. Continental spokesman David Messing declined to comment on that speculation.
Prolonged oil prices above $100 a barrel could even run the USA's only perennially profitable carrier, Southwest, into the red on a full-year basis for the first time since 1972. The Dallas-based discounter's recent quarterly profits have been mostly the result of gains from its industry-leading fuel-hedging program.
Southwest has locked in fuel prices by contracting for future delivery at negotiated prices. Though it continues to be the best-hedged U.S. carrier, those hedges are eroding as oil prices climb and futures investors seek a premium for locking in a price for the airline. This year, Southwest has contracts guaranteeing that the price of 75% of expected fuel purchases will be based on crude prices no higher than $36 a barrel. Next year, that falls to 65% at $41 a barrel. Only 39% of its 2009 fuel needs are hedged, and at prices up to $44 a barrel.
Southwest CEO Gary Kelly discounts the likelihood of $100 oil.
"We don't think the fundamentals justify the current price, and certainly not something as high as $100. There's a lot of fear included in the market price right now." Still, Kelly acknowledges that
"world events could occur that could push the market price much higher." That's why, he says, Southwest hedges in the first place.
Perhaps not such an "idiot" after all...
