Thursday, March 24, 2005

WSJ.com - Delta Needs to Cut More Costs To Offset Mounting Fuel Prices

WSJ.com - Delta Needs to Cut More Costs To Offset Mounting Fuel Prices

A billion here and 500 million there, sooner or later you have a real savings. Delta continues to make news because it needs cash to cover rising fuel costs. Delta expects rising fares to cover 25% of its needs. It is difficult to be optimistic about the prospects for Delta. On the other hand, experience tells us to buy what no one else will.

We have positions is CAL, AMR, and NWAC. We will hold what we have for now. When new USAir stock is issued we will take a look. It is expected that regional carriers such as Republic and Wisconsin Air will be the majority owners of the "new company".

In the absence of a new terrorist attack, the projected economy for the next few years could not be much better for the airlines. Businesses have money to spend and are indeed investing in plant and equipment. Business travel should be strong.

Delta is not the only carrier to reduce flights and employees. When demand begins to fill capacity, the pricing wonder will begin. That is the price of a $100 ticket will quickly rise to $300 or more. Can Delta hang on to see the turn?

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