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Economy Adv Exts - Brinks - Global Economy



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Economy Adv Exts - Brinks - Global Economy




Global economy is marching towards a collapse - we are facing an unprecedented crisis


Snyder 12 (Michael Snyder, the editor of the economiccollapseblog.com; “19 sources warning about a coming global financial collapse”, http://etfdailynews.com/2012/07/10/19-major-sources-warning-about-a-coming-global-financial-collapse-tza-sds-faz-spy-indexsp-inx/, July 10th 2012) mcclellan

Global leaders have tried just about everything that they can think of, but the coming global financial catastrophe continues to march steadily toward us.  We have seen “stimulus packages”, quantitative easing, bond buying, interest rate cuts, emergency economic summits, bailout packages for banks, bailout packages for entire nations, “Operation Twist”, unprecedented government intervention in business and massive amounts of new government debt and yet nothing seems to revive the global economy.  In fact, it looks like we are rapidly heading into the second dip of a “double dip recession”.  Unfortunately, many believe that this next dip will be more like a full-blown depression.  All over the world, top economic experts are warning that we are facing an unprecedented crisis of debt and insolvency that will result in a global financial catastrophe.  The eurozone is drowning in debt, the U.S. government is drowning in debt and major banks all over the globe are drowning in debt.  Global authorities have been trying to patch the system together and keep it going, but the incredible damage that all of this debt has done is now becoming apparent to everyone.  The global debt bubble that has fueled prosperity in the western world for the last several decades is getting ready to burst, and when that happens the chaos that will result will be absolutely horrifying.

Economy Adv Exts - Brinks - Airline Industry




Airline industry is on the brink - suffering from profit losses


Matthew, Phillips,11, http://www.freakonomics.com/2011/06/24/why-do-airlines-always-lose-money-hint-its-not-due-to-taxes-or-fuel-costs/, “Why Do Airlines Always Lose Money? Hint: It’s Not Due to Taxes or Fuel Costs”,6/24/11.
It’s been more than 30 years since the airline industry was deregulated in 1978. Since then it’s lost nearly $60 billion on U.S. operations, though most of the losses have come since 9/11. The airlines were already in trouble before the attacks happened. The plunge in demand and resulting liquidity crisis led to billions in government cash and loan guarantees– the first true bailout of the 21st century, and certainly a sign of things to come in the next decade.¶ In a paper published last month, (Abstract here; full version here) Berkeley economist and overall airline guru Severin Borenstein examines some of the most common explanations for the airline industry’s dismal performance, and why experts and deregulation advocates failed so badly to predict what would happen after deregulation 30 years ago. A few key stats:¶ Domestic passenger airline operations lost $10 billion from 1979 to 1989, made profits of $5 billion in the 1990s and lost $54 billion from 2000 to 2009. To put these numbers in context, at the end of 2009, the entire book value of U.S. passenger carriers’ assets was about $163 billion and the book value of shareholder equity was $10 billion. Even at the end of 2000, after six consecutive profitable years, their assets were $159 billion and shareholder equity was $40 billion.¶ From 1979 to 2001, the U.S. airline passenger fleet grew in every year, by an average of 4.9% per year measured by aircraft and 3.6% per year measured by aircraft-seats. From the end of 2001 to the end of 2008 (latest available date), aircraft and aircraft-seats declined by 1.7% and 1.4% per year respectively.¶ The domestic airline industry has reported negative net income in 23 of 31 years since deregulation and a strongly negative aggregate net present value of earnings.¶ The knee jerk explanation among many airline analysts has been to blame the industry’s poor performance on overly burdensome taxes and high fuel costs. But Borenstein argues they’ve had little to do with it:¶ Descriptive statistics suggest that high taxes have been at most a minor factor and fuel costs shocks played a role only in the last few years. Major drivers seem to be the severe demand downturn after 9/11 — demand remained much weaker in 2009 than it was in 2000 — and the large cost differential between legacy airlines and the low-cost carriers, which has persisted even as their price differentials have greatly declined.¶ Here’s his case against fuel costs as the main culprit:¶ Fuel costs increases have certainly been a significant component of losses in some years, most obviously in 2008. Over the deregulation era, however, oil costs were highest in the first 7 years and the most recent 5 years, over $40 per barrel in 2009 dollars, and much lower during the 19 intervening years. [F]rom 1986 to 2004 the average jet fuel price was below $1.40 per gallon — relatively stable and much lower than in the early period of deregulation. Yet, the industry still lost money in 13 of those 19 years and on net lost $31 billion in 2009 dollars.¶ While there have been several taxes added to the cost of flying (passenger facility charges in the early 1990s, the segment tax in 1997, and the September 11 security fee in early 2002), Borenstein argues that the problem seems not to be that taxes have risen, but that base fares have fallen and stayed so low. He attributes this to the rise of low-cost carriers (LCCs), and the inability of the legacy players to adjust:¶ Adjusted for the average flight distance, legacy carrier costs have remained 30%-60% higher than the LCCs for nearly all of the deregulation era, averaging about 40% higher in the last decade. While the cost differential between LCCs and non-LCCs has remained large, the average price differential has been shrinking. LCC fares have declined much less than those of legacy carriers in the 2000s, reflecting in part their lower burden of excess aircraft capacity. This is no doubt a large part of the reason that LCCs have suffered much milder losses in the 2000s.¶ Airline bottom lines improved in 2010 as the industry consolidated routes and took profits, but Borenstein sees no reason why the future will be any less dismal.¶ [T]here is little reason to think those disruptions will be less frequent in the future. Furthermore, after more than 30 years, it seems unlikely that airline losses are due entirely to a series of unfortunate exogenous events relative to what management and investors should have expected.¶ [T]he experience of the last decade suggests that until legacy carriers can either close the cost gap with LCCs or increase the price premium they maintain, they will likely have difficulty earning consistent profits through the typical cycles in the airline business environment.

Airline industry is near collapse - loss of profits and personnel - multiple airlines filing for Chapter 11


Philip Greenspun,11,http://articles.businessinsider.com/2011-07-04/home/29986242_1_airline-industry-passenger-traffic-pilots,http://articles.businessinsider.com/2011-07-04/home/29986242_1_airline-industry-passenger-traffic-pilots,7/4/11,editor of Business Insider.
The June/July 2011 issue of Air Line Pilot, the official journal of ALPA, the largest U.S. airline pilot’s union, arrived in the mail. It contains a review of the preceding decade. Here are some interesting numbers:¶ the peak of U.S. airline employment was in 2000, with more than 650,000 Americans working for an airline. “U.S. airlines have cut nearly 150,000 employees since the peak,” based on government statistics, leaving just over 500,000 employed¶ the peak of U.S. airline pilot employment was in 2005, with 76,078 pilots. The numbers are down slightly since then, with 74,552 pilots working in 2010. There has been a gradual shift from major airlines to regional.¶ passenger traffic in the U.S. peaked in 2007 and the current traffic levels are about 6 percent below the peak¶ ticket prices during the decade, adjusted for inflation, went down 21 percent (they were flat in nominal terms; compared to a 117 percent rise in college tuition, an 82 percent rise in the cost of eggs, and a 46 percent rise in the cost of a movie ticket)¶ jet fuel prices rose an average of 10 percent per year during the decade¶ revenues for U.S. cargo-only airlines, such as UPS and Fedex, grew from $20 billion in 2001 to more than $30 billion in 2010 (down from a 2008 peak of more than $35 billion); these numbers are not adjusted for inflation and the 2001 number would be about $24.6 billion in 2010 dollars¶ the last supersonic passenger flight, an Air France Concorde from Paris to New York, took place in 2003¶ more than 30 percent of U.S. airlines filed for Chapter 11 bankruptcy protection during the decade (i.e., 30 percent of airline shareholders were wiped out)¶ a lot of new jobs for pilots will be with “state-owned airlines”; under the headline “Rise of the Middle Eastern Airlines”, it is forecast that “By 2029, 68 percent of air traffic volume will be from the emerging economies in such countries and regions as Asia, Brazil, India, and the Middle East.”¶ Read more: http://articles.businessinsider.com/2011-07


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