"I am a capitalist pig. I am a total economic libertarian, and I am ready to send the airline executives to the gulag. You know, I am ready to nationalize the whole thing."

-- P.J. O'Rourke, speaking on Real Time With Bill Maher, March 21, 2008

Uh-oh.

You know it's bad when a confessed economic libertarian wants to shut you down. But O'Rourke has a point. Take a look at yesterday's lowlights:

  • United Airlines parent UAL (Nasdaq: UAUA) said its net loss for the first quarter more than tripled to $4.45 a share from $1.32 a share in last year's Q1. And that's in spite of a 7.7% increase in operating revenue.
  • JetBlue (Nasdaq: JBLU) fared far better. First-quarter operating revenue climbed 34% to $816 million. Profits, however, remained elusive: JetBlue lost $0.04 a share in Q1.

Neither report pleased investors. Nor did the news that oil had topped $119 per barrel. UAL shares sold off  more than 36%. JetBlue fell nearly 6%.

Choking on black gold
Not surprisingly, fuel prices hurt both carriers, as they did AMR (NYSE: AMR), Continental (NYSE: CAL), and Southwest (NYSE: LUV) last week. And don't think Delta (NYSE: DAL) and Northwest (NYSE: NWA) escaped, either, because they didn't, as today's reports show.

But it was JetBlue that really suffered. Its fuel costs rose 61.8% to burn up nearly 38% of first-quarter revenue. UAL, meanwhile, saw fuel expenses rise 51.3%, to consume 39% of revenue.

And it could get worse. Per-barrel oil prices have risen 17.5% since March 31. United, for its part, told investors that it would cut 1,100 workers and mothball 30 of its most inefficient aircraft. UAL also plans to cut nonfuel costs by $200 million and capital expenditures by another $200 million.

JetBlue told investors it would limit capacity growth as it has in the past and charge a $20 service fee to passengers traveling with more than one checked bag. (Anyone else wonder how that's going to work out when oil goes past $120 a barrel? Moving on.)

Buh-bye, bargains
Bigger than either story, though, was the one that got largely ignored. Except, that is, by investors. The CEOs of soon-to-be-combined Delta and Northwest, Richard Anderson and Doug Steenland, respectively, said that airlines have to raise prices 15%-20% because most cost-cutting measures have been exhausted.

(Thud.)

Don't worry. That's the just the major airline labor leaders. They fainted upon hearing that the management team of a major carrier might finally stop trying to take salaries and benefits away from them.

Isn't it about time? Fares have fallen consistently since the 9/11 attacks, yet carriers continue to promise more legroom, better entertainment, and so on. JetBlue still makes this pitch today. Anderson and Steenland argue that such a model isn't sustainable. I agree.

Take a closer look at JetBlue's income statement.

Metrics

Q1 2008

Q1 2007

Difference

Revenue

$816

$608

$208

Aircraft fuel

($308)

($190)

$118

Source: JetBlue press release. Numbers in millions.

More than half of the gains made on the top line were wiped out by higher fuel prices. Talk about a thumb in the eye.

Let's put this into context. Nationally, gasoline now sells for more than $3.50 per gallon, on average. Americans have been paying dearly at the pump to get to school, commute to work, and take vacations. But at the exit row? We're still breathlessly pining for cheap fares. Bill Shatner says we should. It is, after all, just a matter of negotiating.

Or is it?

Here's my point. For all of the blunders airlines have made -- and there have been many -- the inescapable truth is that we travelers are paying less than we did six years ago. Yet per-barrel oil prices are up more than 300% over the same period.

Nationalize the airlines? I have a better idea. How about we all just agree to pay our fair share?

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