Monday, February 2, 2009

AirTran flights grounded in Atlanta

A computer problem in one of AirTran planes flight dispatch system was the reason that they ordered a full ground stop at the Atlanta hub for several hours today, preventing planes from taking off or landing.

I am going to say that I told you so …… my previous post pointed out that technology has to be updated:
We have to trust that despite many airlines making bad fuel hedges, that they will take advantage of lower fuel costs to invest in newer equipment. The lower operating costs can help the strong airlines like United, Delta and Continental, to invest in newer technology and better elite customer retention methods.

Passenger revenue per available seat mile is growing for several of these well managed carriers. AirTrans fourth quarter profits were not good due to bad risk of selling their hedges. They reported a non-operatons loss of $147.7 million related to fuel hedge contract sales of 2009 negatively hedged contracts traded. Another discount airline, Southwest, is also having trouble with bad fuel hedges even though they have historically been one of the best hedgers.
Lower fuel prices, capacity cuts, checked bag fees and aggressive fare sales have not prevented the airlines from huge losses. I know that they report that their hedges did not work out as guessed and the economy is not good, but you would think that some of the carriers should fare better than others. They can’t all have made bad fuel hedges. I don’t think that it is good risk management to gamble a big percentage of profits, but they can always go to the Government to get a bail out of taxpayer money if it does not work out for them.

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