Originally Posted by
PAXboy
Thanks for posting,
cyrilroy21, and this could be useful to people new to the field. For those in the biz, or long terms pax, none of this is new.
The questions to be asking are :
- How will it end?
- Given that the carriers cannot club together to force prices up, the pax will continue to force prices down.
- When will national govts (where not restricted by statute) finally stop funding their loss making flag carriers?
- When will more carriers merge?
- When will national govts allow more cross border ownership?
- Is merging and cross border ownership (to reduce overheads) the answer?
- When will owners/shareholders decide that owning an airline is not as glamourous as it once was and stop throwing money at it?
- Etcetera etcetera
Of course, it goes without saying that, the fuel is going to be crux of it all.
PaxBoy, just some thoughts on the items in your list.
- Even when the airlines were allowed (encouraged) to club together to force prices up they were unsuccessful Having one fixed price for all direct and indirect journeys encouraged the indirect carriers to find ways to fudge and undercut the direct operators, who in turn ... etc.
- In the EU governments can only fund loss making airlines under certain conditions (i.e. a valid decision that any shareholder would make). This is much less of a problem that it used to be.
- Your points 4 and 5 should be reversed. Cross-border mergers are still very difficult to manage. Recently the Russians questioned Swiss's ability to operate from Switzerland to Russia as it was not an airline 'owned and controlled' by Swiss nationals. Similar with Austria. (Both Swiss and Austrian are owned by Lufthansa). In the EU there are no rules, but that only applies to flights within the EU.
- How many players in the Oil industry? Less than 20 big ones? How many players in the Auto industry? About the same, perhaps a few less. How many airlines are there? 300 or so. Merging and otherwise reducing the number of players would indeed improve the situation. Economies of scale are to be had.
- Shareholders in all industries are looking for a quick return. The days of 20 year, five year and one year plans are long gone. The key these days it's the next shareholder's meeting. Keep them happy for a year and you're a hero, fail and you're a bum.
- Fuel is a cost, and like any cost needs to be managed. But every increase in total price means that you will spill passengers. Soft economies (i.e. fewer business travellers) is probably a much bigger influence.