Podcast with ATA chief economist on $100 oil

Addison Schonland over at IAG is doing what I think is the best job of anyone on podcasts in air transport. He’s taking the medium seriously and using it to genuinely add something to the debate. I worked together with him to interview John Heimlich, who’s VP and chief economist at the US Air Transport Association (ATA) on what $100 oil means for the airlines. John really his knows his stuff and makes some smart observations. Take a listen.

I’d be very interested in your views on podcasts. Leave a comment if you’ve got opinions on that.

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6 Responses to Podcast with ATA chief economist on $100 oil

  1. Timothy O'Neil-Dunne November 27, 2007 at 12:18 am #

    Solid story – somewhat scary. Covered the bases. We need more stories and commentary like this

  2. Aurora November 27, 2007 at 12:44 am #

    Great conversation!

    What struck me was that “fuel has now eclipsed labor” as the (U.S. airlines’) highest expense. I note that American Airlines and it’s restive pilots union is currently in contract negotiations against the backdrop of USD$100/bbl oil. These negotiations are not likely to conclude soon. Even if oil were to fall next year to USD$70/bbl, that is likely to still leave fuel as the highest cost. Who’s going to blink first, AA or its pilots?

  3. Alan Guinn November 27, 2007 at 12:59 am #

    First off, on Podcasts in general– we have found this to be an excellent method of communication and learning; we believe in them wholeheartedly. We are even integrating them into Webinars we conduct online from an education standpoint.

    On $100 oil, it’s problematic— from an economic standpoint. When we had $16-$20 per barrel oil, we found ourselves claiming shortages (remember 1974? I do)

    Now that we’re just under $100 per barrel, it’s due principally to manipulation of the market variables.

    That having been said, however, all the hedging in the world can only protect air carriers for so long. We consulted on a fuel budget for one of the flag carriers only two years ago, and in a quick review of the suppositions a few days ago, I was shocked at the differences in line items within the budget.

    I do believe, however, that the expansion of usage in other countries is creating demand extension which is driving prices upward. And for the aviation business, with its boundaries less fixed but more contingent–as I tell my Aviation Management students at Rushmore University— it’s an XXL problem in a Medium-sized world.

    Plaudits to Kieran and Addison. Keep up the great job!

    Alan Guinn, Managing Director
    The Guinn Consultancy Group, Inc.

  4. Erkan Pinar November 27, 2007 at 8:32 am #

    As a daily user and contributor of IAG’s blogs and podcasts, I am also very affirmative of this new way of disseminating information within one industry.

    Amongst all blogs that I have come across recently, I personally find IAG to be the most neutral and open to all echelons of what aviation is about and also with the needed ease and laugher when and where needed. Addison always finds the right mix of serious issues and light-weights.

    On 100 USD oil: I gave a consultation on the Asian Cargo Market recently and was asked by my clients about the oil price then. I said that if it would stay below that 100 USD mark, the cost of obtaining and keeping the flight crew will be more expensive as the market has dried up.

    Now, we see the fuel costs overtaking the pilot costs and both are very worrying indications indeed. We should discuss this in more depth I think. Be assured to get it all on Addison’s IAG blog.

    erkan pinar

  5. John Cullom November 27, 2007 at 9:49 pm #

    In general, Addison’s podcasts cover an enormous range of subjects within the airline industry. This podcast is typical of the inquiry into the interplay of economic factors you find on the show.

    What’s particularly fascinating about the subject of fuel is that is impacting just about every facet of the business. I’m shocked to hear that fuel is a larger expense than labor, but given that, it becomes obvious that fuel is going to have a significant impact on this round of labor negotiations and that LCC’s may be facing an even larger problem than the network carriers.

    The competitive implications are even more interesting. The primary cost differential among carriers used to be in labor. Now it’s in fuel efficiency, and the airlines don’t have a lot of opportunity to improve that given the state of orders at Boeing and Airbus. That’s going to mean dangerous times for carriers that built themselves around a low utilization strategy – i.e. old aircaft.

    We may see a forced reduction in capacity as inefficient fleet types are grounded, helping the pricing environment for the survivors. In the end, $100 fuel may be good for the healthy airlines if the economy as a whole holds up. That, however, is a big if. I’m certain Addison will be on top of the story as it develops.

    John Cullom, Managing Director

  6. Kieran Daly November 28, 2007 at 2:38 pm #

    Thanks for your comments everyone. Very educational. Seems to me that this medium is taking off much more in US business circles than in Europe. My concern is that people don’t have the time to listen through them – but it’s interesting that clearly some serious-minded people at least are OK with it.

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