What will happen?
Well, this an extract from some research out last week (MS, 11/09): note codes are stock or dodgy abbreviations, not the usual airline codes:
We downgrade AF-KLM from O to E and on LUFT from O to U. We believe the European network airlines will face increasing revenue headwinds in 2008 — revenue trends are softening on long-haul routes relative to 2005-06, while capacity growth is increasing and business cycle demand is peaking, in our view.
Our F2008-09 forecasts now generally sit 5-10% below consensus. History shows that negative EPS revisions are very damaging to airline share price
performance.
Yield momentum is the key share price driver. Even a stable/flat yield trend in the past has not been enough. Management teams are going to be under growing pressure to drive profitability through cost-saving initiatives — we calculate that several key cost items would need to fall by at least 10% to help keep EBIT estimates at our current base-case levels.
Capacity growth and business cycle are important. As we observed with the introduction of RYA and EZJ to the short-haul market in the late 90s, industry yields collapsed almost 25% in 1995-2000 — we believe there could be a similar effect on long haul in the medium term. In addition, the incremental demand from corporates (investment banks in particular, to which airline shares are highly correlated) will at best be flat next year, in our view.
Within our Cautious sector view, we believe LCCs show a more compelling risk-reward balance. AF-KLM has delivered the most promising revenue
trends, combined with a clear path to cost reduction (€1.4 billion programme) defined through to 2010. Lufthansa has opportunities but exposure to new
long-haul entrants such as Emirates keeps us wary. BA has Terminal 5, but we believe opposing amounts of revenue risk from ‘Open Skies’ and changes to the competitive landscape at Heathrow offset this.
Of course, this does not directly translate to pilot recruitment - however - the effect on people's ability to finance the training, as mentioned by WWW, could be substantial.
The basis of the current problems are a number of lax lending standards in the US, which have meant that banks are not sure what other banks are holding, and therefore are overly-cautious to lend to each other. This translates to tighter lending standards for all, including in the UK and Europe, which will probably make it harder to get a loan, particularly where there is risk of not being able to repay that loan (due to there being no jobs).
Currently, I doubt this will get better for another 3-6 months from my viewpoint in the City.
matt85 - gambling
winnings are tax-free: not the interest income you earn on the deposit.
CTC also means reduced mobility, do you really want to fly the same type of aircraft, live in the same town and work for the same airline for seven years? Its a person choice. I don't believe in spending money before I recieve it unless I have too.
Most people will take that job, than making life hard for themselves unnecessaily.
I work for a company that deals with overseas stuff so I'm not loosing my job anytime soon either.
And how would that protect you? Not at all is the answer.