TROUBLES AHEAD WITH EUROPEAN AIRLINES ON STOCK WATCH AS WEATHER AND AN OLD FAMILIAR FOE COMBINE TO MAKE THE OUTLOOK FOR WINTER 2010/11 TRICKY!

Dino D'Amore
By Dino D'Amore December 9, 2010 11:11

TROUBLES AHEAD WITH EUROPEAN AIRLINES ON STOCK WATCH AS WEATHER AND AN OLD FAMILIAR FOE COMBINE TO MAKE THE OUTLOOK FOR WINTER 2010/11 TRICKY!

Brent crude topped $90.91 a barrel at the close yesterday with the Nymex and WTI both at $88.28, both down on the day. Oil is increasing in line with winter demand, spurred on in Europe and much of North America by the grip of harsh weather, with reports suggesting yesterday that much of Northern Europe will suffer a once in a lifetime period of very cold conditions throughout December. Airlines will have to deal with the higher fuel costs and many will be that little bit more upset by the fact that they should be enjoying better fuel burn with shiny new 787s by now.

The winter snow storms in Europe are bringing an additional headache aside from helping to increase fuel costs. Flights within the European Union are covered by legislation that says if a flight is cancelled then the airline still has an obligation to get the passenger to his or her destination and to look after the same. In fact passengers that suffer delays to journeys caused by cancellation, even if out of the control of the airline such as weather conditions, are entitled to an alternative flight or a refund, plus two free phone calls or e-mails once a flight is delayed for over two hours, meals and over night accommodation are also required in some cases, all a terrible burden indeed on airlines. At this point we should mention the additional cost of de-icing aircraft too.

For these reasons together with the continued economic uncertainty many airlines are seeing their stock value come under pressure. The good run for airline stocks, in Europe at least, is all but over for the time being and all eyes will be on  the weather prospects for the all important holiday period as loss of revenue for airlines during the two weeks at the turn of the year will be highly damaging to annual targets.

Dino D'Amore
By Dino D'Amore December 9, 2010 11:11
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