Lowerlobe, once again, I can't really see where you disagree with my generic observation that increasing oil prices results in the decline of the airlines, both in size and profitability.
This is where your argument falls down as it does with all the other doomsday exponents...
Was the price of oil higher than $50 a barrel in the 50's and 60's ?????
The answer, as you know, is NO. See the following link:
Historical Crude Oil Prices Table
To summarise, the
highest inflation adjusted price in the 50's was
$24.42. In the 60's it was
$20.88. So oil is significantly more expensive today then it has been for the majority of the history of commercial aviation. And yes, I know tickets are cheaper now, but as I have stated before that is a result of de-regulation, privatisation, decrease in T&C and increased competition etc.
You might not have noticed that the price of everything has risen as it does over time.The price of steel,eggs,cabbages,milk,newspapers etc..the list goes on.
Well actually, along with everyone else who is not yet decomposing, I have noticed. I will go further and ask, are you aware that the price of all these items is also significantly effected (on top of inflation) by the oil price, as oil is a major input into all sectors of the economy, particularly food production and farming techniques.
However,if that happens the airlines increase the price of a ticket....
Were it so easy. However, as the Professor has stated, there is very little price elasticity in the modern airline marketplace. Increase ticket prices a little, and there is a disproportionate decrease in demand. That is why the airlines only passed through a very small percentage of the high oil prices last year onto the ticket price.
as I said then all you do is have smaller aircraft and less pax and higher ticket prices.
Elegant solution, and one I agree with. However, implement that solution at a current legacy carrier (or even a LCC), which has large aircraft and low ticket prices, and tell me whether the result will feel like 'decline' to that airlines staff and shareholders?
There will always be people with money that will want to fly.
Yes, though the number that will be able to
afford to fly must decrease.
To expand on my argument. The price of kerosene increasing will hurt the airlines bottom line, but with hedging and price fluctuations, airlines can absorb the extra costs and survive, but they will need to cut costs in other areas (T&C the next biggest cost on the books).
But what will really hurt the airlines is the corresponding fall in GDP as oil increases. All the Recessions in the postwar era, with the exception of the dot.com bubble bursting, were the result of a spike in oil prices.
Oil goes up, GDP contracts, demand contracts, capacity must be reduced.
Feels like decline to me.
