December 15, 2010

 

Weekly Issue 031210

 

Contents

 

Commentary by Bob Booth

Flight Control Waves

Waves from Europe

Commentary by David Bentley

Waves from the Pacific

Waves from the Americas

Cargo Waves

Financial Waves

Tourism Waves

Fuel Waves by Larry Weaver

 

Commentary

by Bob Booth

 

Happy Holidays Airlines and readers of AirWaves

IATA has just released its revised industry outlook for 2010 with a net profit of $15.1 billion, an increase of 69.6% over 2009. Major drivers for the 2010 forecast are:

·                     Passenger traffic growth of 8.9%

·                     Strong passenger yield growth of 7.3%

·                     Revenue growth to $565 billion

·                     An average annual oil price in line with projected $79 per barrel

 

IATA also believes the operating environment will become more difficult in 2011 because of:

·                     Increased fuel cost. For 2011 the average fuel cost is expected to increase to $84 per barrel, up from $79 in 2010

·                     Slower GDP growth. The 3.5% GDP growth in 2010 to slow to 2.6%

·                     Taxation: Austerity measures, particularly in Europe, are expected to dampen demand.

 

The following are regional forecasts of profitability for 2011:

 

·                     North American carriers to see a 2010 profit of $5.1 billion decrease to $3.2 billion in 2011

·                     Asia-Pacific carriers to post the largest profit of $7.7 billion in 2011

·                     Middle East carriers are expected to see 2010 profits of $700 million shrink to $400 million in 2011

·                     European carriers with a $400 million in 2010 shrinking to $100 million in 2011

·                     Latin American carriers will see their $1.2 billion profit in 2010 shrink to $700 million in 2011

·                     African carriers will see 2010 profits of $100 million move to break even

 

Our comments: We remain more optimistic about 2011 profitability through out the world. We don’t have a specific forecast, but this week’s AirWaves features significant continued expansion, consolidation and growth globally– in just one week. The following headlines are all about new, expanded capacity around the world, as well as tourism development which is growing along with cargo revenues:

 

Qatar Airways to add a second daily flight between Doha and Sao Paulo

Turkish Airlines adding frequencies and routes to China

Egyptair and SAS begin code share flights between Europe and Africa

Scandinavian Airlines (SAS) to restart flights between Oslo and Newark

Dubai and Emirates Airline secure 10 more liberalized air agreements

EVA Air to launch flights to additional destinations in China

Aeromexico and Volaris to operate new flights to the United States 

United Airlines is looking to expand joint ventures within the Americas

Boeing announces that Latin America will lead the growth in aviation

Iberia to begin code share with GOL in Brazil

TAM begins Belo Horizonte Miami service

Aerolineas Argentinas to add flights between Iguazu in South America

Tourism growth in the Caribbean and Latin America is the key for JetBlue

Copa Airlines Colombia launches new nonstop to Havana from Bogota

 

Read all about it and stay tuned. Happy holidays to all.

 

 

Flight Control Waves

 

Foreign Direct Investment to grow 17% in developing countries this year

The Agency for Guarantee Multilateral Investment (MIGA) announced that FDI in 2010 will grow 17% in developing countries. The World Bank estimates that FDI in emerging markets will each $416 billion this year and will grow 20% in 2011. According to a survey among 194 multinational investors shows that Brazil, Russia, India and China (BRIC) will take almost 50% of the investments, while poor countries will receive 3% of the total. MIGA reports that FDI in developing countries has increased by $185 billion in 2010. Stay tuned.

 

IATA reports Q4 2010 air freight

The following is from the IATA Cargo eChartbook Q4 key points from the fourth quarter report on the air freight industry and markets. Impressive, to say the least.

  • Economic drivers of cargo volumes are changing to consumer and business capital spending, as business restocking comes to an end;
  • Market divergence continues with very weak economic outlook in parts of Europe but strong growth continuing in Asia and South America;
  • Cargo volumes have slipped from their May peak but this looks like a temporary pause before further, albeit slower, growth;
  • Load factors have also slipped as capacity returns, but cargo yields have held up in recent months;
  • Fuel costs have risen to the top half of the past year's range;
  • Ocean bulk and containerized transport confirms that world trade through to Q3 continued to expand;
  • Cargo profitability is back to 2007 levels.

To subscribe to IATA economics, go to www.iata.org/optin and select “Economic briefings”. Cargo is driving the economy, in our view.

 

What to Watch in 2011  

(Re-printed from Airline Weekly, Issue 314, Dec. 13, 2010)

 

  • Another escalation in the distribution wars: Led by American and its North American peers, airliners are again playing hardball with global distribution systems. First it was the internet that enabled carriers to shift substantial volumes of leisure bookings away from GDSs and the travel agents used them. Then deregulation in 2004 gave them bargaining power to hold back content. Now its new business practices like dynamic merchandising and ancillary selling coupled with maturity of direct connect technology and the expiration of some key full content contracts. Will airlines manage to bypass the GDSs more in 2011 or at least partner with them in lowers cost ways, as some LCCs like Southwest and easyJet are now doing?    
  • Growing fleets and seats: Will airlines, benefiting so nicely from supply restraint in 2010, blow it by increasing capacity too aggressively next year? Capacity growth can be tempting cost palliative. But it can shrink revenues just as fast.    
  • Merger harvesting: Many of the grand mergers and joint ventures announced in 2010 won’t start bearing fruit until 2011 and beyond. The promised synergies in some cases are quite substantial, perhaps even enough to offset any revenue and cost shocks that are sure to come.   
  • The world divided by three: It’s now difficult to find a major airline in the world that doesn’t fit into one of the three groups: the alliance members, the Gulf carriers and the LCCs. The coming year could spell trouble for carriers that are exceptions (i.e., Virgin Atlantic and Malaysia Airlines).
  • More coalescence of the willing: Is consolidation done? Almost certainly not. Europe’s Big Three still hope to vacuum up the remaining midsized carriers in their backyard. U.S. carriers like American and US Airways might look to deal. And might cross-border consolidation become more prevalent?
  • The economic outlook: Can developed economies, their gears no longer in reverse, accelerate to fifth-gear growth? And can emerging markets, already in high-growth mode, keep it up?
  • Always the billion dollar question: Where will oil prices go in 2011?

 

 

Waves from Europe

 

Qatar Airways to add a second daily flight between Doha and Sao Paulo

Akbar Al-Baker, CEO of Qatar Airways announced that the airline is adding a second daily flight between Doha and Sao Paulo, Brazil. He also stated the airline is planning a second daily flight to Buenos Aires based on the anticipated 85% load factor. Way to go, Viva Qatar – stay tuned.

 

Turkish Airlines adding frequencies and routes to China

The Turkish airline has added three weekly flights between Barcelona and Madrid and Guangzhou. It will also increase its current five times weekly to seven times to Peking. The new service will be operated with A330, A340 and B777-300s. Viva Turkish Airlines – stay tuned.

 

 

Commentary

by David Bentley

 

Sporting preparations

The degree of preparedness of individual countries for major sporting events such as the Olympic Games and the Soccer World Cup is of endless fascination to me. Those ‘on the horizon’ so to speak are the 2012 Games in London, the 2012 UEFA European Soccer Championships in Poland and the Ukraine, the 2014 Soccer World Cup Finals and 2016 Games in Brazil/Rio de Janeiro and, as a result of recent decisions taken by FIFA, the 2018 and 2022 World Cup Finals respectively, in Russia and Qatar, where chilled air will be blown inside enclosed stadium in order to offer some relief from the scorching 500 Celsius heat outside.

 

These events are matters of macho nationalistic pride, hence the sullen attitude of the British media after England failed to land the 2018 World Cup Finals, despite the presence immediately before the decision was taken of the so-called ‘3 Lions dream time’; a gauche line up of Royalty (Prince William, heir to the throne), politics (Prime Minister Cameron) and celebrity (soccer player/one man brand David Beckham), which garnered just two votes out of 22 - and one of them was England’s. They’d probably have had more success sending some kids from TV’s ‘The Apprentice’.

 

But these events only last a matter of weeks and you have to wonder sometimes if the massive infrastructure they generate is really worth the effort. It is usually justified by use of the ‘L’ word – legacy - and in some instances it really has been justified. Take Athens for example, where, if it were not for the 2004 Olympics, Greeks and visitors alike would probably still be lumbered with Ellinikon, possibly the worst airport ever. Instead, we have shiny new Sparta, which has been a success story for the Greek government (which has little else to crow about) and private sector investor/developer Hochtief Concessions. Olympic venues may since have been dismantled in Athens and the Games might well be best remembered for a mad Irish priest attacking the leading runner in the men’s Marathon just a couple of miles from the line, like something out of ‘The Omen’, but Sparta (or Elefthérios Venizélos to give it its correct title) stands as a genuine legacy of those Games.

 

Likewise, Beijing’s new terminal for the 2008 Olympics, still the largest in the world despite the efforts of pretenders like Dubai and Delhi, though Beijing still has not got the new airport it really needs. No such luck for Sydney, which got hardly any new airport infrastructure to speak of for the 2000 Olympics, and even now they can’t decide on a site for a second Sydney airport to help out the stuffed-to-capacity Kingsford Smith – a debate that seems to have been raging since the days of Ned Kelly.

 

In Manchester it was the reverse case to Athens and Beijing – its airport almost helped it get the Olympics in 1996 and 2000 when it had little else going for it at the time and certainly did so for the 2002 Commonwealth Games. It’s a pity it has gone backwards since then.    

 

The jury is still out as they say on whether or not this year’s World Cup in South Africa was the outright success that was claimed, especially where transport is concerned. The Guateng province finally got its ‘Gautrain’ that connects the O R Tambo airport with Johannesburg and Pretoria, even if its points seized up in the sub-zero temperatures during the event, causing it to travel at snail’s pace. On the other hand Durban was given a new airport it didn’t really need and the authorities seem to be so embarrassed that they refused the quite reasonable request by an airline, Comair, to operate the old Durban Airport, which is now just sitting there doing nothing, as a private ‘low cost’ airport. Then on top of that many spectators for a semi-final game that was held in Durban never even landed there as the new airport couldn’t handle the volume. Neither did the private (non-ACSA) airport operators seem to benefit much. Lanseria Airport, between Johannesburg and Pretoria, handled a few extra private jets belonging to the FIFA hoi-polloi and associated hangers-on, but that’s about it. One indirect benefit arising is that ACSA (Airports of South Africa) has the experience now that quite possibly Infraero in Brazil, might benefit from in 2014/2016.

 

It is to be hoped that both Brazil and Poland/Ukraine learn from these experiences. Poland does seem to be making some headway, albeit belatedly, having invested in a new alternative airport for Warsaw where the first earth was turned early in November and in two other airports, at) and Lublin. As for the Ukraine I’m not convinced the country has the capacity and wouldn’t be surprised to see Poland Gydnia (for Gdansk re-nominated as the sole host. Brazil can’t do that of course; it signed up to present the 2014 and 2016 events and is expected to deliver as the exciting new economy and the B in BRIC. I can’t comment on stadia and other forms of transport but where airports are concerned I believe there is more chance now of them being ready and capable on time since the election of Dilma Rousseff as President. At least she seems a tad more inclined to welcome the much-needed foreign investment and expertise than was her predecessor.

 

Considering that England will host the next Olympics and was a ‘serious’ (ha!) contender for the World Cup you’d think that the transport infrastructure (like its soccer stadia) would be immaculate. Think again. BAA/Ferrovial’s debts meant that investment in the new T2 at Heathrow, which will replace the original one and T1, was delayed almost to the point of no return and because there is no national aviation plan right now no other infrastructure can be added in time for 2012; we’re stuck with what we’ve got. They long ago gave up on the intention to complete the ‘Crossrail’, an underground railway that will connect Heathrow with Stratford, a suburb close to the Olympics site, via central London, by 2012. The latest date is 2018 for part of the line only, by which time the Games will be a distant memory.

 

Meanwhile, and quite reasonably, smaller airports around London want to be part of the action, including Southend, which is now owned and operated by a legendary road haulage company; Manston, which hopes to be the equestrian handling centre; Luton, which bizarrely proposed a runway extension just to handle extra traffic during the Games; and Biggin Hill, a general aviation/bizjet base in South London that hopes to compete with London City airport, which is virtually next door to the Games site.

 

Which just leaves us with Russia and Qatar. Russia’s hopeless infrastructure embraces both airports and airlines, and was recently heavily criticized by Siim Kallas (an Estonian) who is the European Union’s Transport Commissioner and a Vice President. Then again, I suppose he would – memories are as long as the winters in the ex-Soviet Baltics. Russia certainly has lots of work to do and I pity the supporters who find their country’s first game is in Kaliningrad and the second one a few days later in Vladivostock, eight time zones away. Qatar is well prepared with one wonderful stadium at least, and a new airport due to be unveiled in 2012, despite having to build entire new towns for the event, never mind stadia or transport facilities.

David Bentley is Joint Managing Director of Big Pond Aviation, a British-Canadian air transport research and consulting company and who have been an industry media commentator and analyst for much of the last decade. During this time he has researched and written 12 management reports on a variety of subjects including airport privatization and financing; low cost airports, airport security and airline financing. www.bigpondaviation.com. (Please see the banner advertisement).

 

Lufthansa acquires eight regional jets from Embraer

The German airline has signed a purchase contract with Brazil’s Embraer for eight ERJ195s for $338 million. Delivery of the aircraft is scheduled for the first half of 2012. The new acquisition is in addition to the existing fleet of 30 ERJ190s and ERJ195s which the airline purchased in 2007. Lufthansa plans to expand its presence in the European regional markets where demand is growing significantly. Way to go Lufthansa, stay tuned.

 

Egyptair and SAS begin code share flights between Europe and Africa

The new code share agreement is effective today, December 15, 2010 and will provide passengers from both airlines travel between Brussels, Gothernburg, Osloa and Stockholm, with SAS to Copenhagen and on to Cairo with Egypt Air to Cairo. Viva code sharing – stay tuned.

 

Scandinavian Airlines (SAS) to restart flights between Oslo and Newark

The restart flights between Oslo and Newark will begin in March 2011, operating with A340 aircraft. Way  to go SAS – stay tuned.  

 

 

Waves from the Pacific

 

Dubai and Emirates Airline secure 10 more liberalized air agreements

The 10 agreements have now secured more than 60 “Open Skies” or highly liberalized aviation agreements for Dubai and Emirates  Airline. T he 60th and 61st with Brazil and Panama are the latest negotiations in 2010. They follow eight other open deals successfully concluded during the course of 2010. The US, UK, Spain, Thailand, Singapore, Switzerland, Malaysia, Chile, New Zealand and Lebanon are among the 60 countries that have signed highly liberal or “Open Skies” agreements with the UAE and Dubai. Viva “Open Skies”: Dubai and Emirates Airline.  Stay tuned.

 

EVA Air to launch flights to additional destinations in China

The Taiwan-based airline, with its subsidiary, Uni Airways are launching new flights from Taiwan to Taipe – Zhengzhou this month, Taipe – Jinan from December 18 and Taichung – Ningbo from December 20 2010. Way to go – stay tuned.

 

Beijing International Airport ranks second in passenger handling worldwide

Zhang Guanghui, General Manager of the Beijing International Airport announced last week the airport has handled 70 million passengers thus far in 2010 – and he is forecasting the airport will handle a total of 74 million passengers in the full year. Making it the second busiest airport in the world. Viva Beijing – stay tuned.

 

 

Waves from the Americas

 

Air Canada plans to have five-weekly flights between Toronto and Lima

Peruvian Minister of Transport and Communications (MTC) modified the existing permit, published last week, for Air Canada to increase its service between Toronto and Lima to five weekly flights. Viva Air Canada – stay tuned.

 

Aeromexico and Volaris to operate new flights to the United States  

As a result of the FAA approved Mexico’s Category 1 status the two Mexican airlines are adding significant new service between Mexico and the United States. Aeromexico has added an additional weekly flight to New York and Miami, for a total of four flights daily; it is adding three weekly flights to Chicago and five more to Los Angeles, with two more to Las Vegas. By the 11th of January 2011 it will add two flights to San Antonio and ill operate a total 434 weekly flights between Mexico and the United States. Volaris announced it will increase its current service between Mexico and the United States y 50% as it receives six new aircraft. Way to go, stay tuned.

 

United Airlines is looking to expand joint ventures within the Americas

After completing mega-mergers in the United States, United’s CEO, Jeff Smisek announced last week: “Latin America is an area that we are keenly interested in; we are also looking at potentially having a trans-border joint venture with our friends at Air Canada.”  United has joint ventures with Lufthansa for trans-Atlantic flights, and All Nippon Airways for trans-Pacific flights. One to watch, stay tuned.

 

Boeing announces that Latin America will lead the growth in aviation

According to the company’s Current Market Outlook, Boeing believes that aviation growth in Latin America during the next 20 years will lead the world, with the region’s airlines needing 2,180 new aircraft during the period. It estimates the investment in new aircraft could reach $210 billion, with Brazil and Mexico receiving the majority of new aircraft, Brazil with 38% and Mexico 18%. Boeing also reports that the Latin American airlines’ fleet has grown by 215 aircraft during the past ten years to reach a total of 1,060 aircraft, with an average age of 10.5 years. Where the action is. Stay tuned.

 

Brazil’s economy grows 8.4% in 2010 through September

Brazil’s IBGE statistics agency announced that the economy has grown 8.4% in the nine months through September 30, and by 7.5% for the 12-month period ending September 30. Private and government economists have forecast that the country’s gross domestic product (GDP) will grow 7.5% this year as the country rebounds from the global economic crisis. Viva Brasil, with an “S” – stay tuned.

 

Iberia to begin code share with GOL in Brazil

The Spanish airline has begun code share flights with Brazil’s GOL airlines on five domestic routes within Brazil. The Spanish airline will place its code on flights operated by GOL from Rio de Janeiro and Sao Paulo to five domestic destinations operated by the Brazilian airline. Viva code share, stay tuned.

 

TAM begins Belo Horizonte Miami service

The new nonstop service was launched on December 2, 2010 with a B767-300 aircraft. The service follows increased demand from the mining capital of Brazil, Belo Horizonte’s Confin airport. According to the airline’s CEO, Libano Barroso, direct flights from Brazil to Miami are enjoying a major increase in demand for traffic both ways. Way to go, TAM – stay tuned.

 

 

Financial Waves

 

LAN Airlines reports November traffic increased 11.2%

The “model airline” reports system passenger traffic grew 11.2% in November on capacity increase of 8.5% - moving the system load factor 2.0 points to 81.5%. Year-to-date traffic grew 10.8% on capacity increase of 9.3%, moving the system load factor for the year up 1.1 points to 78.1%. Domestic traffic in Chile, Argentina, Peru and Ecuador rose 7.4% on 7.1% increased capacity, moving the domestic load factor up 0.2 points to 79.6%. International passenger traffic grew 12.9%, on capacity increase of  9.2%, moving the international load factor up 2.7 points to 82.4%. Cargo traffic increased 9.6% in November mainly due to the growth of imports to Latin America, driven by Brazil, as well as increased operations to Europe with B777 freighter fleet. Year-to-date cargo ton kilometers were up 25.1%. Viva LAN Airlines – congratulations Enrique and company.

 

United Continental Holdings reports combined RPMs in November up 4.8%

The combined airlines of the United Continental Holdings reports its November passenger traffic (RPMs) up 4.8% year-over-year on 4.1% capacity increase, moving the consolidated load factor up 0.6 points compared to last year. In November consolidated PRASM (passenger revenue per available seat mile increased to 12% while mainline PRASM increased 13% compared to the same month last year. Viva consolidation, Stay tuned.

 

Peru reports domestic passenger traffic grew 26% in the first nine months

According to the Peruvian Civil Aviation Authority (DGAC) more than 3, 958 million passengers were carried through September 30 in 2010, for a 26% growth year over year. In 2009 3 million passengers were flown on domestic routes. The Peruvian airlines reported individual airline growth: TACA Peru (56%); Star Peru (29.8%) and LAN Peru (10.3%). Viva Peru – stay tuned.

 

Austrian Airlines carried 6.8% more passengers in November

The Austrian airline carried 798,100 passengers in November for a 6.8% growth over the same month last year. The load factor rose by 0.4 points to 73.1%.  For the period January-November, the airline carried 10.2 million passengers, for a 9.9% increase year-over-year. The load factor rose 3 points to 77.2%. Viva Austrian Airlines – stay tuned.

 

Copa Holdings reports consolidated traffic rose 19.3% in November

The Panama-based airline group, which includes the subsidiary, Copa Airlines Colombia, reported consolidated traffic rose 19.3 % in November, with capacity up 20.1%. Copa Airlines passenger traffic up 18.4% on capacity increase of 17.8%, while Copa Airlines Colombia passenger traffic rose 32.6% with capacity up 32.6%. Viva Copa Holdings – stay tuned.

 

Lufthansa reports November group traffic rose 6.9%

The German airline group reported November traffic to 7.26 million passengers, for an increase of 6.9%. Lufthansa Airlines traffic increased to 4.88 million passengers for an increase of 10%. Viva Lufthansa – stay tuned.

Brazil’s air traffic grows 19.2% in November

The country’s National Civil Aviation Agency (ANAC), passenger traffic (RPMs) reached 6.1 billion in November for a record 19.2% growth year-over-year. TAM led the Brazilian airlines’ results with 42.6% of the market, while GOL was in second place, with 38% market share. Viva Brasil, with an “S” – stay tuned.

 

 

Cargo Waves

 

US cargo airline, Sky Lease applies for authority to serve Colombia

The all cargo carrier has applied for authority to serve several Colombian destinations from Miami with A300 and one MC-11F. The proposed service would include Bogota, Medellin, Barranquilla and Cali. In total it plans to operate 42 weekly flights. Copa Colombia is also applying for authority to provide passenger and cargo service between Bogota and Miami. Viva Cargo – stay tuned.

 

Qantas Freight to increase Tasman freighter capacity by 40%

The cargo affiliate will increase its Tasman freighter capacity by 40% as it deploys a B767-300F on the route from February 2011. According to Stephen Cleary, Executive Manager of Qantas Freight, said the Tasman market is one of the most important and the new aircraft will provide Australian and New Zealand exporters with more dedicated capacity and even better service reliability. Way to go Qantas Freight – stay tuned.

 

Southern Air expanding in the ACMI market

The US carrier is using the financial resources of its partner, Oak Hill Capital Partners, to expand its presence in the cargo ACMI market to acquire 10 747-200Fs, 10 777-200Fs, and 10 747-400 in service by 2014. It is currently deploying 14 747-200Fs and two 777-200Fs. Way to go, viva Cargo and ACMI.

 

 

Tourism Waves

 

Aerolineas Argentinas to add flights between Iguazu in South America

The CEO of the Argentine airline, Mariano Recalde. Announced last week the airline is adding 15 weekly flights, in addition to its existing 35 operated currently between Foz de Iguazu. Four flights weekly will include Rio de Janeiro, three to Sao Paulo, three to Cordoba and five with connections to Cuzco, Peru. It’s all about tourism demand. Stay tuned.

 

Tourism growth in the Caribbean and Latin America is the key for JetBlue

Robin Hayes, JetBlue’s commercial executive vice president, announced recently: “Right now we have an average of 20 daily flights in the spring and more than 25 in the summer in the Dominican Republic.”  He also stated the airline plans to increase flights between the Dominican Republic and Puerto Rico. Viva JetBlue, stay tuned.

 

Copa Airlines Colombia launches new nonstop to Havana from Bogota

The Copa Holdings subsidiary (former AeroRepublica) has launched its once weekly nonstop flight between Bogota and Havana, Cuba. The flight, operated with an ERJ190 aircraft, provides instant connections between Bogota and Medellin, Cali and Bucaramanga domestically, as well as Guayaquil and Quito in Ecuador. Another tourism driven service. Stay tuned.

 

 

Fuel Waves

By Larry Weaver

 

As was expected, OPEC decided on Saturday to maintain current quotas without change. Their de facto leader Saudi Arabia said it still favored oil prices between USD 70 and USD 80 per barrel.  According to a report by Bloomberg, however, John Sfakianakis chief economist at Riyadh-based Banque Saudi Fransi said “In order for Saudi Arabia to push other OPEC members to do something prices have to remain at $100 for a long period and not only for some weeks or a month, this is not likely to happen soon.”

 

This is “good news” and “bad news”. Good in that prices are not expected to stay at $100/bbl – or higher – anytime soon but the “Bad news” is that if/when they do, there is not likely to be any relief from OPEC with more crude being pushed into the market. I think we can temper this bad news with the knowledge that if/when prices exceed $100/bbl the members of OPEC will want to take advantage of the higher pricing and will exceed their quota limitations as they have in the past. The difficulty with this is that the Saudis are the only ones in OPEC that have sufficient spare capacity to really make a dent in the market.

 

One other item to consider – in addition to simple production – is the “speculation in the market. Right now net speculative length in WTI is about three times higher than it was a year ago and nearly four times higher than at the end of 2007 when oil prices were close to the prices we are experiencing today. In addition, the IEA has raised its 2011 oil demand growth forecast, and has indicated that the fundamentals of supply and demand are strong, with oil inventories starting to drop from their historically high levels.

 

This week's US DOE report confirms this with US crude inventories dropping some 9.9 million bbls from last week although, at 346 million bbls, it is still above the upper limit of normal for this time of the year. Gasoline inventories increased 0.8 million bbls and are in the upper half of the normal range. Heating oil stocks increased 1.1 million bbls while jet fuel stocks dropped 2.0 million bbls – possibly due to the use of jet in heating oil to improve the pour point during the cold snap that is gripping the northern part of the U.S.

 

Pricing continues to edge up. Since August, jet fuel prices have climbed approximately $0.35 per gallon while heating oil has climbed over $0.40 per gallon and crude has climbed about $10/bbl (some $0.23/gal). We believe we will continue to see these slow increases in the market at least through the winter in the Northern Hemisphere.

 

Larry Weaver is an Aviation Fuel consultant headquartered in Tampa, Florida with over forty years experience in aviation fuels. He is the founder and President of Dellem, LLC. Prior to starting Dellem, he was employed in the Aviation Sales Department of Texaco Inc, and was Manager of Texaco Aviation's Worldwide Operations. In this capacity he was responsible for aviation fuel quality control and wrote the Texaco international Quality Control Manual. He has provided training and consulting in quality control and product handling to Petroleos de Venezuela, the National Science Foundation and his expertise to various other private companies. Dellem has provided worldwide Fuel Acquisition and Management services to airlines for over twenty-five years and has managed in excess of 25 million gallons of fuel per month for Dellem's clients. Contact: lweaver@dellem.com  or airwaves@avnewsinc.com  Att: Larry Weaver

 

 

 

 

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