Rough week for US airlines
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Oh yes they will!!!!!! Everyone wants to pay less
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Absolutly correct Mercinary
Offer On-time,Quality service,Old fashioned tho' it may seem, will work.
I've worked for a mediumT/P Business Operator in the Europe area for the last 4.5 yrs, and all pax will say that they will keep on using the service because it gets you there on time.
It has made good profit for the last 11 concecutive yrs. I is a joy to work for and has a shallow gradient between Magmt and crew so idea's come and go all the time.
Very professional, Competent, All members included
How's about that then!!!!
Offer On-time,Quality service,Old fashioned tho' it may seem, will work.
I've worked for a mediumT/P Business Operator in the Europe area for the last 4.5 yrs, and all pax will say that they will keep on using the service because it gets you there on time.
It has made good profit for the last 11 concecutive yrs. I is a joy to work for and has a shallow gradient between Magmt and crew so idea's come and go all the time.
Very professional, Competent, All members included
How's about that then!!!!
October 24, 1978.
That day is when the airline industry in the USA went to hell. Deregulation.
That day is when the airline industry in the USA went to hell. Deregulation.
Last edited by pigboat; 4th Apr 2008 at 16:11.
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Circles 'round the drain.
Despite the slowdown in Europe, no big names have headed down the pan yet (possibly just a question of time)
This from Carl Mortished of The Times (London). Emphasis is mine.
THE mile-high party is over but only the airlines have failed to notice.
As BA disappears under a mountain of lost luggage in its new terminal, rivals are preparing to launch new trans-Atlantic services from Heathrow while across Europe squadrons of new aircraft are taking to the skies.
Airlines do not behave like normal businesses. Faced with a challenge, they have a single response - expansion. When the chill wind of recession blows and the fuel price escalates, they prepare for take-off. Instead of sitting tight, they buy more aircraft, increase services and cut fares.
The rampant growth in air traffic is not sustainable and the business model must change. It is not only the incumbent flag-carriers that are threatened but the new low-cost carriers that thrive because of two market miracles - the availability of very cheap fuel and galloping growth in passenger numbers. But these buttresses are crumbling, playing havoc with a business model that has changed the face of aviation over the past decade.
Airports are a mess, airline staff are in rebellion and the cost of jet fuel is soaring. What is less apparent is weakening demand for air travel. IATA, the airline establishment's lobby organisation, signalled the downturn this week, pointing to weakening load factors and a marked slowing in growth in revenue passenger kilometres, key industry volume statistics.
The load factor, the percentage of seats holding bottoms, fell in every region in February, with the biggest fall in Europe. Passenger kilometres worldwide grew at a rate of 4-5 per cent, which sounds good except that this industry has become accustomed to 7-8 per cent annual volume increases.
For airlines, Europe has become a rotting carcass upon which a swarm of flies is feasting. In January, passenger kilometres increased by only 2.8percent in Europe, which included weak growth of 1.7 per cent on North Atlantic routes and almost no growth on Asian routes.
Still the aircraft roll off the assembly lines, adding more seats to a bloated market. Capacity in Europe increased by 4.4 per cent in January - and it is the low-cost carriers that are leading the expansion, with EasyJet promising 15 per cent more capacity this year.
Low-cost airlines can cope with over-capacity if the market is growing rapidly. The low-cost model assumes that passenger numbers rise at twice the pace of growth in GDP - it enables EasyJet and Ryanair to pile them high in the cabin with the stimulus of low fares.
High load factors spread the impact of rising costs, such as fuel and maintenance, more thinly between paying passengers.
For example, last year EasyJet reduced its average fare by 3.3 per cent and revenue per seat fell about pound stg. 1 to pound stg. 40.42. However, non-fuel costs fell more than 6 per cent to pound stg. 26.55 per seat. The cost of fuel was pound stg. 10 per seat, leaving EasyJet with a profit of just under pound stg. 4 per seat.
Cheap energy is the first buttress to go because EasyJet's overall fuel bill will rise 30 per cent this year, which will bring the cost per seat to about pound stg. 12.50. It is a huge bite of the airline's margin and the company issued a profit warning in February. Air Berlin admitted this week that it was suffering the cosh of dear kerosene.
Economies of scale and general parsimony will not bridge the gap. If the low-cost carriers are to regain balance, they need massive growth in revenues. Where will it come from?
A market growing at 2-3 per cent cannot generate enough momentum to fill seats if overall capacity is growing at twice that rate. If the low-cost carriers are to fill their new aircraft, they must steal passengers by cutting fares ever more aggressively.
They must salami-slice their profit margins until they look less like the New Model Airlines of the future and more like yesterday's tired old model airline flying on an expensive wing and a financial prayer.
The alternative is to accept more empty seats on each plane. That means increasing fares and the budget carriers are doing this with ancillary revenues and late bookings: charging for food and extra baggage, while business travellers who must fly today pay double.
Instead of no-frills flying, low-cost carriers are offering lounges and priority boarding, just like BA. Soon, the pressure will mount to offer more. How long before EasyJet divides the aircraft cabin into haves and have-nots? Of course, it needs original marketing - perhaps "Quiet and easy", a guaranteed toddler-free experience for an extra pound stg. 20 per ticket?
The New Model Airline is getting a bit frilly, but the emerging strategy of "make the punter pay" will work only if capacity is drained from Europe's overcrowded skies. That requires more airline bankruptcies. The only alternative is a return to very cheap fuel and the odds must be better on the former than on the latter.
The Times
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Instead of no-frills flying, low-cost carriers are offering lounges and priority boarding, just like BA. Soon, the pressure will mount to offer more. How long before EasyJet divides the aircraft cabin into haves and have-nots? Of course, it needs original marketing - perhaps "Quiet and easy", a guaranteed toddler-free experience for an extra pound stg. 20 per ticket?
If this is indeed the future for the US industry also, can it happen during a recession? Which airlines can/will react first? and can the majors ride out another 5 or so years while the customers decide what they want or can afford?
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SLF here, and I pay with my own money too.
Something not mentioned so far and is crucial to understand the distorted market airlines work in is the government endorsed subsidy to be found in many parts of the world. In this I include the Americans with their legally enshrined right for bankruptcy protection from creditors. In a real market many if not most of the legacy carriers in the States would have long gone. I for one was delighted to see Pan Am and TWA go, terrible value for money. Other than American Airlines (which I believe has not ever filed for bankruptcy) all the other majors would not exist but for bankruptcy protection laws. All of them should have been liquidated to allow Loco entrants. Nor should we forget the US protectionist approach to foreign ownership of airlines, usually on the spurious grounds of national security (as if the US government couldn't demand compliance with a national emergency by US registered companies). If this downturn is as bad as some serious commentators are saying eg Martin Wolf in the Financial Times, then the continued shouldering of the financial burden of airlines by either creditors in bankruptcy proceedings or by SLF, business or leisure customers, will become untenable and some serious fallout for shareholders and employees of these outdated airlines will occur.
Something not mentioned so far and is crucial to understand the distorted market airlines work in is the government endorsed subsidy to be found in many parts of the world. In this I include the Americans with their legally enshrined right for bankruptcy protection from creditors. In a real market many if not most of the legacy carriers in the States would have long gone. I for one was delighted to see Pan Am and TWA go, terrible value for money. Other than American Airlines (which I believe has not ever filed for bankruptcy) all the other majors would not exist but for bankruptcy protection laws. All of them should have been liquidated to allow Loco entrants. Nor should we forget the US protectionist approach to foreign ownership of airlines, usually on the spurious grounds of national security (as if the US government couldn't demand compliance with a national emergency by US registered companies). If this downturn is as bad as some serious commentators are saying eg Martin Wolf in the Financial Times, then the continued shouldering of the financial burden of airlines by either creditors in bankruptcy proceedings or by SLF, business or leisure customers, will become untenable and some serious fallout for shareholders and employees of these outdated airlines will occur.
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Huck
Absolutely right. But interestingly it is an issue driven by protectionist states such as the USA not by the UK. A very interesting short article on this in the Independent here http://www.independent.co.uk/news/bu...es-421849.html
shows just how protectionist the Americans are.
Absolutely right. But interestingly it is an issue driven by protectionist states such as the USA not by the UK. A very interesting short article on this in the Independent here http://www.independent.co.uk/news/bu...es-421849.html
shows just how protectionist the Americans are.
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Didn't (some?) US carriers get federal aid after 11 September? I seem to remember European airlines complaining bitterly about it, arguing that it allowed trans-Atlantic US carriers an unfair competitive advantage.
On the other hand, some state aid to EU airlines looks, on the face of it, quite dubious, too.....
On the other hand, some state aid to EU airlines looks, on the face of it, quite dubious, too.....
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There is some truth to looking at the maritime industry as a view to the future of US airline travel.
BUT, BA came in and bought a piece of USAIR(ways) and thanks to the advice of BA USAIR almost went out of business.
Foreign ownership of USA airlines is a security concern. So, controlling interest by a foreign owner is very unlikely.
Things will sort themselves out. And someday the traveling public will wake up to this: you get what you pay for.
and right now , the traveling public pays very little and gets very little.
I would rather shop at Nordstrom twice a year than WalMart every week. So too with airline travel.
BUT, BA came in and bought a piece of USAIR(ways) and thanks to the advice of BA USAIR almost went out of business.
Foreign ownership of USA airlines is a security concern. So, controlling interest by a foreign owner is very unlikely.
Things will sort themselves out. And someday the traveling public will wake up to this: you get what you pay for.
and right now , the traveling public pays very little and gets very little.
I would rather shop at Nordstrom twice a year than WalMart every week. So too with airline travel.
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Skybus (USA) shuts down too!
Skybus out of Columbus called it quits tonight!
http://www.dispatch.com/live/content...4/skybust.html
http://www.dispatch.com/live/content...4/skybust.html
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I don't know why people wish back the regulated years in the US. It's not that we want the regulations but the old good airlines from then.
Well, what happenes now is exactly this: Because of high fuel prices, the LCC are going down, while the systems and network carriers still are alive - well, more or less. Network carriers deliver more service (or, at least, should so in theory) and are spending therefore a smaller part of their budget on fuel.
The consequence should be that only a few will survive. As soon as we have monopolies again, prices will rise again, airlines will make profit and some of them might even invest in better passenger service. At the moment they just cannot.
The problem is that as soon as the big airlines are making profits again, some LCC are coming again, trying to take away their share. In the end, who will win, is the market. Funny that our American freinds are wishing away the good old free enterpreneurship, after all what we in Europe were told that free markets are the only solution...
Dani
Well, what happenes now is exactly this: Because of high fuel prices, the LCC are going down, while the systems and network carriers still are alive - well, more or less. Network carriers deliver more service (or, at least, should so in theory) and are spending therefore a smaller part of their budget on fuel.
The consequence should be that only a few will survive. As soon as we have monopolies again, prices will rise again, airlines will make profit and some of them might even invest in better passenger service. At the moment they just cannot.
The problem is that as soon as the big airlines are making profits again, some LCC are coming again, trying to take away their share. In the end, who will win, is the market. Funny that our American freinds are wishing away the good old free enterpreneurship, after all what we in Europe were told that free markets are the only solution...
Dani
Not so sure that LCCs will go down. As I said before, in times of recession businesses/corporations reduce costs by insisting that staff (including mid-level executives) downgrade from the Legacy carriers to the cheaper (theoretically) LCCs. This is certainly applicable to the USA where most major LCCs serve the main airports. In Europe, however, it may be different because most LCCs serve secondary airports miles away from business centers. There will be a number of casualties in Europe for sure. In contrast, RYR will most probably survive through brute strength (and selling off part of their fleet to the expanding airlines in China/India).
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With oll > $60
nevermind staying at $100 plus I am not sure how many airlines will survive. There will be massive pressure on costs so am not expecting much in way of pay increases over the next few years. Any airline that breaks even will be doing well. Just read this morning that 400,000 northern Rock mortgage holders are being forced to leave NR and find deals with other companies at rates 1 to 2% higher than they previously had. How are they going to be able to afford to fly this year ?
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My own opinion on why the USA airlines are failing is that they are trying to get passengers numbers at what ever the cost.
It has always been said that any one can fill an aircraft and operate at a load factor of 100%, this is what it has resulted in.
I have watched over many years as an airline puts its fares up by say 10$, some follow and then one drops back to the original prices and low and behold within a few days it is back as it was.
How many airlines have raised their fares over the last few years, to cover the extra money that they are all having to pay out?
Just think if the airlines in the states had to operate as we have to do in the rest of the world and pay for all your costs, l think l am correct in that the US government foots most if not all the TSA costs.
It has always been said that any one can fill an aircraft and operate at a load factor of 100%, this is what it has resulted in.
I have watched over many years as an airline puts its fares up by say 10$, some follow and then one drops back to the original prices and low and behold within a few days it is back as it was.
How many airlines have raised their fares over the last few years, to cover the extra money that they are all having to pay out?
Just think if the airlines in the states had to operate as we have to do in the rest of the world and pay for all your costs, l think l am correct in that the US government foots most if not all the TSA costs.