Wednesday, March 5, 2003
Trans-Atlantic loads off, Continental says
www.chron.com
March 4, 2003, 11:29PM
By BILL HENSEL JR.
Continental Airlines is projecting its trans-Atlantic passenger traffic will fall by 15 percentage points this month, largely because of worries about a possible war with Iraq.
In a filing with the Securities and Exchange Commission, Continental also said that demand is weak throughout its system and it expects a poor showing in April.
"Trans-Atlantic bookings are looking weak in March, mainly due to concerns about a conflict with Iraq as well as the shift of Easter," Diane Dayhoff, Continental staff vice president for finance, wrote in a letter to the SEC on Tuesday. "We anticipate that our March trans-Atlantic load factor will be down about 15 points year over year."
A load factor is a calculation widely used by airlines to determine how full planes are.
April bookings "are currently showing some softness as well," Dayhoff wrote.
The figures included in the Houston-based carrier's regulatory filing are the first declarative projections from an airline about how it expects war with Iraq to impact passenger travel.
Continental, like most other major airlines, has been losing millions of dollars because of a sluggish economy, the aftermath of Sept. 11 and changes in business travel trends.
In addition to the impact of war jitters, the Easter holiday, which fell in March last year, has shifted to April. That will also cut into the March bottom line.
February's storms hurt Continental's operations in the Northeast and Midwest, according to Dayhoff. She said the company estimated those storms cost the company $10 million to $15 million before taxes.
Continental said in a report earlier this week that its load factor for February was 68.9 percent, 3.2 points below the load factor for February 2002.
Credit Suisse First Boston analyst Jim Higgins expressed disappointment with Continental's load factor for February. Credit Suisse had estimated a 2 percent increase in capacity for the airline.
The ongoing impact of the potential for war with Iraq on airline traffic coupled with the shift of the Easter holiday from March into April "suggests softer than usual trends," Higgins said in a report released Tuesday.
"We therefore expect downward revisons" to first-quarter earnings estimates, Higgins added.
Shares of Continental were down 22 cents Tuesday, winding up at $5.14 at the close of trading on the New York Stock Exchange.
Geopolitical events have led to higher fuel prices, Higgins noted, including jet fuel. The price of crude oil has risen 15 percent since the first of the year and is about 60 percent above last year, while jet fuel is up 75 percent, he said.
"The recent strength in crude prices will only exacerbate the airline's revenue softness," Higgins said.
The American Petroleum Institute's John Felmy attributed the crude oil price increase to a "perfect storm" situation of Venezuela shutting down production, very cold weather in the United States and nervousness over Iraq.
Felmy, the petroleum institute's chief economist, said while he could not speculate about what will happen with prices, he noted that winter will end soon and crude production already has begun to rebound in Venezuela.
"It is going to be how all of those factors come together that will affect crude prices, and that will in turn affect jet fuel prices," he said.
Rising gasoline prices are under investigation in Virginia.
Posted by sintonnison at 11:07 PM
in
oil us
www.washingtonpost.com
By Kenneth Bredemeier
Washington Post Staff Writer
Wednesday, March 5, 2003; Page E02
Virginia Attorney General Jerry W. Kilgore's office is investigating whether gasoline prices "are going up artificially or being driven by the market."
Kilgore said that in the past two weeks four lawyers and another staff member from his office have questioned producers and gas-station owners and listened to complaints from consumers about how the average price of a gallon of regular unleaded gasoline has risen in Virginia to $1.58 from $1. A gallon of regular now averages $1.68 nationally and in the Washington area.
"The price will go up with the trouble in the Middle East and Venezuela," Kilgore said. "But does it have to go up this quickly? I'm not sure the market is producing this big a jump."
Officials in Florida and California are conducting similar investigations.
The cost of crude oil typically accounts for about 40 percent of the retail price of gasoline, but lately, with the sharp increase in the price of crude because of the threat of a U.S. attack on Iraq and the lingering effects of a strike by oil workers in Venezuela, the proportion has been more than 52 percent.
Kilgore said that the investigation is being headed by Deputy Attorney General Judith W. Jagdmann and that his lawyers are looking at whether the major oil companies might be violating state antitrust law.
John C. Felmy, chief economist of the American Petroleum Institute, a trade group, said there is no mystery to the gas-price increase: It's simply that the price of crude oil has gone up so much. He said that for every dollar increase in the price of a barrel of crude oil, the pump price will increase 2.4 cents a gallon.
Exxon Mobil Corp. spokeswoman Prem Nair said that in addition to the crude-oil price increases, a colder-than-usual winter has increased the demand for heating oil, resulting in less gasoline being made.
Kilgore said his staff is also exploring why when a gas station raises its prices, others around it do the same.
Kilgore said he expects the investigation to reach some conclusions in about two weeks.
Tim Murtaugh, a spokesman for Kilgore, said the investigation was started after complaints from consumers and gas-station franchise owners who claim that the major oil companies impose rules that needlessly push gas prices higher, and that company-owned stations are favored.
Bruce B. Keeney Sr., executive vice president of the Virginia Gasoline Marketers Council, which represents about 1,000 of the 3,500 gas stations in the state, said the major oil companies' system of "zone pricing," in which retail gas prices in specific areas are kept more or less the same, is anti-competitive because the oil companies quickly change the wholesale price of gasoline if any station owner attempts to lower the pump price to meet competition from another dealer.
Felmy said it was "completely bogus" that normal pricing practices had anything to do with the recent gas-price increases.
Hugo Chávez and the Limits of Democracy
www.nytimes.com
March 5, 2003
By MOISÉS NAÍM
WASHINGTON — For decades Venezuela was a backwater, uninteresting to the outside world. It could not compete for international attention with nearby countries where superpowers staged proxy wars, or where military juntas "disappeared" thousands of opponents, or where the economy regularly crashed. Venezuela was stable. Its oil fueled an economy that enjoyed the world's highest growth rate from 1950 to 1980 and it boasted a higher per-capita income than Spain from 1928 to 1984. Venezuela was one of the longest-lived democracies in Latin America.
Venezuela is no longer boring. It has become a nightmare for its people and a threat not just to its neighbors but to the United States and even Europe. A strike in its oil industry has contributed to a rise in gasoline prices at the worst possible time. Hasil Muhammad Rahaham-Alan, a Venezuelan citizen, was detained last month at a London airport as he arrived from Caracas carrying a hand grenade in his luggage. A week later, President Hugo Chávez praised the arrest orders of two opposition leaders who had been instrumental in organizing the strike, saying they "should have been jailed a long time ago." Mr. Chávez has helped to create an environment where stateless international networks whose business is terror, guns or drugs feel at home.
Venezuela has also become a laboratory where the accepted wisdom of the 1990's is being tested — and often discredited. The first tenet to fall is the belief that the United States has almost unlimited influence in South America. As one of its main oil suppliers and a close neighbor has careened out of control, America has been a conspicuously inconsequential bystander.
And it is not just the United States. The United Nations, agencies like the Organization of American States and the International Monetary Fund, or the international press — all have stood by and watched. In the 1990's there was a hope that these institutions could prevent, or at least contain, some of the ugly malignancies that lead nations to self-destruct.
Instead, the most influential foreign influence in Venezuela is from the 1960's: Fidel Castro. The marriage of convenience between Cuba and Venezuela is rooted in the close personal relationship between the two leaders, with Mr. Castro playing the role of mentor to his younger Venezuelan admirer. Cuba desperately needs Venezuelan oil, while the Chávez administration depends on Cuba's experience in staging, managing or repressing political turmoil.
Another belief of the 1990's was that global economic forces would force democratically elected leaders to pursue responsible economic policies. Yet Mr. Chávez, a democratically elected president, has been willing to tolerate international economic isolation — with disastrous results for Venezuela's poor — in exchange for greater power at home.
The 21st century was not supposed to engender a Latin American president with a red beret. Instead of obsessing about luring private capital, he scares it away. Rather than strengthening ties with the United States, he befriends Cuba. Such behavior was supposed to have been made obsolete by the democratization, economic deregulation and globalization of the 1990's.
Venezuela is an improbable country to have fallen into this political abyss. It is vast, wealthy, relatively modern and cosmopolitan, with a strong private sector and a homogeneous mixed-race population with little history of conflict. Democracy was supposed to have prevented its decline into a failed state. Yet once President Chávez gained control over the government, his rule became exclusionary and profoundly undemocratic.
Under Mr. Chávez, Venezuela is a powerful reminder that elections are necessary but not sufficient for democracy, and that even longstanding democracies can unravel overnight. A government's legitimacy flows not only from the ballot box but also from the way it conducts itself. Accountability and institutional restraints and balances are needed.
The international community became adept at monitoring elections and ensuring their legitimacy in the 1990's. The Venezuelan experience illustrates the urgency of setting up equally effective mechanisms to validate a government's practices.
The often stealthy transgressions of Mr. Chávez have unleashed a powerful expression of what is perhaps the only trend of the 1990's still visible in Venezuela: civil society. In today's Venezuela millions of once politically indifferent citizens stage almost daily marches and rallies larger than those that forced the early resignations of other democratically presidents around the world.
This is not a traditional opposition movement. It is an inchoate network of people from all social classes and walks of life, who are organized in loosely coordinated units and who do not have any other ambition than to stop a president who has made their country unlivable. Two out of three Venezuelans living under the poverty line oppose President Chávez, according to a Venezuelan survey released in January.
This amorphous movement is new to politics and vulnerable to manipulation by traditional politicians and interest groups. For example, last year a military faction took advantage of a huge but civil anti-Chávez march and staged a coup that ousted the president for almost two days. By rejecting the antidemocratic measures adopted by the would-be new president, the leader of a business association, the movement helped bring about his quick downfall.
Today the Venezuelan opposition consists of several factions, some of which have participated in talks with the government. Yet it is a mistake to equate these formal bodies with the widespread and largely leaderless, self-organizing movement that has emerged in Venezuela. Many foreign observers discount the opposition as mostly rich or middle class, a coup-prone coalition of opportunistic politicians.
No doubt some protesters fit this ugly profile. Nor is there any doubt that the Venezuelan opposition is clumsy and prone to blunders. Still, it has helped millions of Venezuelans awaken to the fact that for too many years they have been mere inhabitants of their own country. Now they demand to be citizens, and feel they have the right to oust through democratic means a president who has wrought havoc on their country.
It is a measure of Venezuela's toxic political climate that even though the constitution allows for early elections, and even though President Chávez has promised that he will abide by this provision, the great majority of Venezuelans don't believe him. They are convinced that in August, when the constitution contemplates a referendum on the president, the government will resort to delaying tactics and dirty tricks. With international attention elsewhere, Mr. Chávez will use his power to forestall an election and ignore the constitution.
Venezuela's citizens have been heroically peaceful and civil in their quest. All they ask is that they be given a chance to vote. The world should do its best to ensure that they have that opportunity.
Moisés Naím, minister of trade and industry of Venezuela from 1989 to 1990, is editor of Foreign Policy magazine.
Opec to discuss oil supply risks with rival producers
www.gulf-daily-news.com
Wednesday 5 March 2003
LONDON: Opec oil ministers plan to discuss output flexibility with six rival exporting nations next week as part of contingency planning in the event of a halt in Iraqi supply, an Opec official said yesterday.
Oil prices hit 12-year highs last week near $40 per barrel on fears that any attack on Iraq will disrupt supplies from the Gulf.
Opec, which has recently lifted output to cover for a crippling three-month strike in Venezuela, would struggle to compensate for a total loss of Iraqi exports.
"Just in case Opec cannot compensate for a shortage in the event of war, these countries could do something," an official said.
Opec ministers will meet representatives from Russia, Norway, Mexico, Oman, Syria and Egypt on the morning of next Tuesday, ahead of a formal Opec meeting in Vienna later on the same day.
Many of these countries have participated in recent output restrictions with Opec, when oil prices were half current levels.
The International Energy Agency estimated last month that the world had 2.3 million barrels per day (bpd) of spare oil output capacity versus latest Iraqi output of 2.5m.
Nascent oil exporters Kazakhstan and Angola have not been invited to the talks.
Opec to discuss oil supply risks with rival producers
www.gulf-daily-news.com
Wednesday 5 March 2003
LONDON: Opec oil ministers plan to discuss output flexibility with six rival exporting nations next week as part of contingency planning in the event of a halt in Iraqi supply, an Opec official said yesterday.
Oil prices hit 12-year highs last week near $40 per barrel on fears that any attack on Iraq will disrupt supplies from the Gulf.
Opec, which has recently lifted output to cover for a crippling three-month strike in Venezuela, would struggle to compensate for a total loss of Iraqi exports.
"Just in case Opec cannot compensate for a shortage in the event of war, these countries could do something," an official said.
Opec ministers will meet representatives from Russia, Norway, Mexico, Oman, Syria and Egypt on the morning of next Tuesday, ahead of a formal Opec meeting in Vienna later on the same day.
Many of these countries have participated in recent output restrictions with Opec, when oil prices were half current levels.
The International Energy Agency estimated last month that the world had 2.3 million barrels per day (bpd) of spare oil output capacity versus latest Iraqi output of 2.5m.
Nascent oil exporters Kazakhstan and Angola have not been invited to the talks.