Rough week for US airlines

[con-pilot]

In the last week or so Aloha, Champion and ATA Airlines have declared bankruptcy and have shut down. All employee's positions have/will be eliminated.

That's a lot of people folks. Sad thing is that these airlines have been around for a long time.

[Thaihawk]

I suspect these closures may be the precursser to a long period of job losses in the US airline industry.

[sevenstrokeroll]

October 24, 1978.

That day is when the airline industry in the USA went to hell. Deregulation.

Even the hotshot low cost carrier, southwest is now cutting corners. where will it end?

[con-pilot]

That day is when the airline industry in the USA went to hell. Deregulation.

Too true, just how many have gone under since?

Pan Am
Eastern
National
Braniff
TWA
Sun Country
Western
Frontier

I know I am forgetting a few.

[Earl]

So I guess the expats that work for the less than desirable charters abroad may not have been such a bad choice after all.
But still really bad news to hear.
Lots of jobs abroad, climbto350 is a good source.
But be careful, lots of non payment ones there.
Good luck to all.

[sevenstrokeroll]

Many airlines, pioneers among them have been lost.

and as to "market forces".

market forces are fine only when there is truly unrestricted competition.

that has never been the case since deregulation. problems with infrastructure negated deregulation's promise

[sevenstrokeroll]

bad apples, chapter 11 and the like?

ha.

some of the greatest airlines have been in bankruptcy. they were the ones that made a massive airline system work.

deregulation, in theory is fine. in practice, it has failed to produce a BETTER airline system. Cheaper perhaps, but not BETTER.

Better. on time...better service...happier passengers

nope, deregulation without a massive infrastructure improvment means things are falling apart.

[saccade]

where will it end?Don't know, but this is probably only the beginning. (related to the past few months, copied from an US forum)


United stopped hiring
Delta stopped hiring
Continental stopped hiring
Northwest stopped hiring
Expressjet stopped hiring
Skywest stopped hiring
ASA stopped hiring
FedEx stopped hiring
UPS has stopped hiring
Expressjet is offering pilots unpaid leave of absences
United is grounding 15-20 737 aircraft
Delta is grounding 10? mainline aircraft
Northwest is grounding 24 DC-9 aircraft
Regional flying has been cut substantially
Comair, Skywest, Expressjet, ASA, Mesa, and others have had their regional contracted flying hours cut
Aloha Airlines filed for bankruptcy (again)
Skybus cut back almost 50% of their routes
Froniter sold 4 aircraft
Jetblue sold 6 aircraft
Big Sky went out of business
Skyway went out of business
Aloha went out of business
Champion Air went out of business

Edit: ATA out of business

[Airbubba]

Looks like the furloughs and pay cuts are next, it's the down part of the cycle again...

[LapSap]

...it's the down part of the cycle again

I must have missed the UP part of the cycle in the last 30 years.

[JuniorMan]

What's sadder is the fact that a few more airlines will probably end up closing their doors in next few months.

[ribt4t]

Airlines in the USA suck ... you get all the frills of Ryanair while paying BA type prices.

[Robert Campbell]

I'm not proud of it, but I was instrumental in bringing down Rich International in 1996. My wife was an FA on Rich and a "Stewardess" on the Otis Spunkmeyer DC-3s. I was a DC-3 Capt. We were all part time. We didn't go anywhere; we were in "showbusiness". We tried to recreate the elegance of airline travel.

Ex TWA Super Connie and 707 water wagon stew, Jen was longing to "return to those wonderful days of yesteryear" for $7.50/hr. block. So she hired on with Rich.

Well, she joined just at the time when passengers were rioting at SFO and LAX because of delayed or cancelled flights. Passengers weren't quite so cowed in those days. Arrest and jail wasn't in the picture and Rich was in the news daily.

It turns out that Rich was trying to fly routes and schedules that required 20+ aircraft with only 14 or 15. If a pilot refused to take a flight because of a mechanical, he was told to fly or be fired, so SFO to HNL and back with flaps inop happened twice that I know of. Once the FA failed to disarm the slide before opening the door at HNL. You can imagine the rest.

When Jen didn't get home on time, I was pretty sure that they turned her and the rest of the crew for a second SFO-HNL-SFO run. Duty time???

More than half the L10s had everything labeled in Arabic. Hydraulics and pressurization were marginal. If a pilot walked in off the street and said he was typed in the Lockheed, he was to told, "There's your airplane, you're going to Frankfurt.

Well, mishaps piled upon near disasters and I really got worried about Jen's safety, so I rang up Rich's FAA Ops inspector in Miami. He tried to brush me off, but when I asked how he spelled his name he perked up and asked why. I told him it was for the article in the San Francisco Chronicle.

The next day, FAA was riding on every flight. They grounded several pilots after one ride. Some had no L1011 type ratings. They found phony or "missing" maintenance records, plus a long list of other violations.

Two days later Rich was history.

I fear that may be happening again.

[fleigle]

RC
What happened to the Otis Spunkmeyer DC2??, where did it end up?
I miss having it wurbling around.
F

[Robert Campbell]

It wasn't a DC-2. It was a stock DC-3 that Donald Douglas presented to Hap Arnold when Hap needed a personal transport.

The contract for the C-47 was two years in the future, so the Army Air Corps called it a C-41.

I think that the AAC had been buying a hybrid DC-2 fuselage on a DC-3 wing (don't ask why) and called it a C-39.

Anyway, the C-41 was supposed to go to United, but Donald Douglas presented it to Hap Arnold at Boling Field in Washington and Hap said "send me the bill", or something like that. Then his daughter married Douglas' son.

Jen and I had that airplane on the US Airshow circuit in 1997 since it was the 50th anniversary of the USAF as a separate service.

There are a lot of very funny stories that are related to that summer, but Jen and I (and our pissy young F/O) had a DC-3 to ourselves for about three months.

There are photos on my website on the aviation and DC-3 pages:

http://www.chamoismoon.com

[411A]

Word on the street is Sun Country, Skybus, Spirit and Frontier are close to closing and may not make it until year end.

This will spread to Europe, fast. Alitalia, anyone?

The BA pilots (which might be termed quite typical) picked a really good time to revolt....:rolleyes::}

[Robert Campbell]

To answer your question about what happened to the Otis Spunkmeyer DC-3s, they had to shut down and sell the airplanes because the cost =of insurance got to be prohibitive.

[KC135777]

While the grounding of a/c does impact manning, let's not forget about the mandatory retirement age just changed to 65 just under 4 months ago.

Also, at UPS/FedEx, they had a bunch of ROPES/Clingons/Herpes (over 60 years old pilot-type) flight engineers, that now get to go back to their Captain's seats, per the new legislation (employed as a required cockpit crewmember when the law changed).

FWIW

[PAXboy]

con-pilot
Too true, just how many have gone under since?
Pan Am
. . .
OK, let's start with the start ups list: :D
Jet Blue
? ? ?

Companies are born and start to grow. Some don't make it past childhood and some live for while and do OK but then marry into another company.

Some companies live a loooooong time and then, they are so old and set in their ways, they find that they have come to the end of their time. So, someone buys the house and furniture that they lived in and manages to reuse parts of it again.

In Europe, we have lost Swiss Air and SABENA and now Alitalia is about to lose it's house.

Companies are just like the people who start and run them. They grow old and die and those that have lived in and with them grieve.

Around the world, we are entering a period of grieving for many kinds of company, not just airlines. Nope, I don't like it either, but we have not learnt from earlier cycles of Boom-and-Bust and now we are going Bust.

[Mercenary Pilot]

Alitalia would have gone bust years ago if it wasn't for the continuous government "interventions".

[beachbumflyer]

What is the solution? I don´t know.
Does anyone know?

[beachbumflyer]

I mean, the solution industrywide.

[Mercenary Pilot]

For the US airlines...

I don't know but I'm sure that American pax are pretty fed up with the extremely poor cut cost service that their major carriers are serving up at the moment and I don't think they will put up with it forever.

There will be big change in the industry over the next decade but I fear that more legacy airlines will disappear taking many jobs with them first. :(

[saccade]

What is the solution? I don´t know.
Does anyone know?

The solution would be the availability of cheap oil, which is probably a thing of the past.

Aviation is having a hard time because we can't possibly compete with other users, such as cars. In Europe we are very happy with paying $370 p/b to fill up our cars with the taxes included. The US will do the same, because people living in 'suburbia' have no other choice. If the supply/demand balance gets tighter the price will keep on rising until air travel is back to the days when only the rich could afford it. Oh, and algae oil costs $800 p/b.

In the mean time, wannabee's are investing 80k in flight training while both Shell's CEO and Exxon Mobil predicting peak oil within the next 8 years. :ugh: Crazy world.

[beachbumflyer]

But when oil was cheap there were airlines going under.

[stepwilk]

Be serious. You say American passengers are fed up and won't put up with it any longer? What on earth do you think they'll do? Lie on the floor and kick their heels? Start their own airline, PassengerAir? Refuse to fly?

Nah. They'll continue to buy $99 tickets to LA and complain.

[Eboy]

A big pile of cash will keep the big airlines from that same fate, for now.

It's not that the big carriers aren't buffeted by the same forces that shut down ATA on Thursday and Aloha on Tuesday. Champion Air, a Minnesota-based charter airline, will stop flying by May 31.

But the nation's biggest airlines have hoarded some $19 billion in cash as of the end of 2007, according to a tally by Calyon Securities analyst Ray Neidl. Even if fuel stays at today's levels and revenue drops 2 percent, they would still have $14.7 billion in cash at the end of 2009, under Neidl's estimate.


http://www.nytimes.com/aponline/business/AP-Airlines-in-Trouble.html?_r=1&oref=slogin

[sevenstrokeroll]

the solution to the US airline problem

reregulate the airlines, fares that allow for a 5 to 10 percent profit for the airlines and investors.

costs inline with current fuel prices.

proper use of larger planes to newly slot controlled or recontrolled airports.

this is the 30th anniversary of deregulation...everything is down...fares are down.

service is down

delays get people down

[fdcg27]

Managements run companies, not unions or staff.
Companies fail because management fails to come up with a viable business plan.
You can't blame labor for the poor choices in shareholders' selection of a board, who in turn select senior management.
In no way is this exclusive to the airline business, either.

[SC_Pilot]

ASA is still hiring. It has just been slowed a little. Interviews two days a week in April, and barring any changes, one day a week in May.

[Mercenary Pilot]

Be serious. You say American passengers are fed up and won't put up with it any longer? What on earth do you think they'll do? Lie on the floor and kick their heels? Start their own airline, PassengerAir? Refuse to fly?


Actually I think they will start looking towards airlines that offer service. We're starting to see the rise of all business configuration airlines over in the UK and corporate aviation is booming. People are fed up with being treated like cattle and have lost the choice between a Lo-Co and a full service.

I don't know what will happen, (if I did then I'd be a very rich man) but I'm fairly sure that the industry especially in the US, will change markedly in the next 10 or so years. With a recession on the way and the price of crude continuously climbing, the first people to stop flying will be the budget leisure travellers.

[Avman]

With a recession on the way and the price of crude continuously climbing, the first people to stop flying will be the budget leisure travellers.

Yep, it's happened before. But it's the strong major locos who benefit and the legacy carriers who suffer. In previous times of recession (in the USA) it was SOUTHWEST Airlines which always continued to post a profit. What leisure pax they lost to recession was ballanced out by $ conscious corporate executives moving down from flying with the expensive legacy carriers.

[orangedriver]

And who will be the big winner, initially anyway? The ME airlines... How much are they "paying" for the oil nowdays? So far it's mainly regional-ish companies being hit, but soon the long haul companies will fall if the oil is staying at current levels. This development will be a nice push for Dubai Inc, Abu Dhabi Inc and Doha Inc. :cool:

[G-ONADS]

"October 24, 1978.

That day is when the airline industry in the USA went to hell. Deregulation.

Even the hotshot low cost carrier, southwest is now cutting corners. where will it end?"

Get your facts right please. Southwest has not cut any corners and is committed to bringing a safe and reliable product to its Customers

[Curious Pax]

the solution to the US airline problem

reregulate the airlines, fares that allow for a 5 to 10 percent profit for the airlines and investors.

costs inline with current fuel prices.

proper use of larger planes to newly slot controlled or recontrolled airports.

this is the 30th anniversary of deregulation...everything is down...fares are down.

service is down

delays get people down

I don't think you would need larger aircraft or slot controls if you implemented items 1 and 2 on your list - the large reduction in passengers that would follow would more than take care of that.

G-ONADS: I think this is what was being referred to:Records: Southwest flew unsafe planes (http://www.pprune.org/forums/showthread.php?t=316850)

[saccade]

But when oil was cheap there were airlines going under.beachbumflyer, the Northwest and Continental CEO's have both said that despite the economic slowdown demand is still strong, but they are unable to cope with the high oil prices. Aloha survived many recessions, 9/11 and even the two oil crises in the 70's but 2008 is killing them.

JetBlue is selling A320's, with clear language from the CEO:

http://www.businessweek.com/ap/financialnews/D8VQL7R80.htm

"We're pretty much at the mercy of the cost of energy into an aircraft," JetBlue Airways Corp. Chief Executive David Barger told an aviation conference at the U.S. Chamber of Commerce.

[PAXboy]

Mercenary PilotFor the US airlines...

I don't know but I'm sure that American pax are pretty fed up with the extremely poor cut cost service that their major carriers are serving up at the moment and I don't think they will put up with it forever.Oh yes they will!!!!!! Everyone wants to pay less and, given the terrible state of the US economy, no one is going to pay a penny more.

stepwilk had it correct:Nah. They'll continue to buy $99 tickets to LA and complain.Which what folks in the UK do and, I have no doubt, other Europeans too.

sevenstrokerollDeregulate the airlines, fares that allow for a 5 to 10 percent profit for the airlines and investors.
costs in line with current fuel prices.
etc. ..Interesting, you want a Communist style ideology to protect you? Yes, it is going to be horrible in the next few years - and not just in the US - but human beings have universally declared that, as individuals, they want to make as much money as possible and spend as little money as possible. 2008 is the place where those demands will crash head on.

[saccade]

Nah. They'll continue to buy $99 tickets to LA and complain.
Which what folks in the UK do and, I have no doubt, other Europeans too.

PAXboy,
LCC's don't have low fares because they just happen to be an LCC. They sell their seats for the optimum price in order to maximize profit. FR is able to operate very thin routes because they can be profitable with relatively low yields. This might change with higher operating costs and hence: higher fares = capacity reduction.

[Huck]

The financial input and different approach to management and problem solving from Europeans might just be what these US airlines need right now.

No argument here....

[skyloone]

Am not much in the know about the US domestic/regional vs. EU market. But what is it that seems to have caused so many problems for the locos there. I hear of less EU ones going to the wall than US. Is this just due to the higher number of such operators, oversupply, problems with underlying costs or is it management pure and simple? Despite the slowdown in Europe, no big names have headed down the pan yet (possibly just a question of time), and in fact some are still growing at a fair pace? Just curious.

[Mercenary Pilot]

Oh yes they will!!!!!! Everyone wants to pay lessNot everyone. I, like many other people I know, WILL pay extra for good customer service and some individual's/companies are prepared to pay a lot of money for better service hence the massive growth in the corporate aviation sector in Europe. Will this continue with the possible economic downturn? We shall see.

[captphil]

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!!!!:D

[pigboat]

October 24, 1978.

That day is when the airline industry in the USA went to hell. Deregulation.


And may the peanut farmer be God eternally damned.

[Leo Hairy-Camel]

Despite the slowdown in Europe, no big names have headed down the pan yet (possibly just a question of time)
Interesting observation, skyloone, and rather timely too.

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

[Mercenary Pilot]

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?

Because people have realised that they want service.... or at least want the choice.

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?

[gdiphil]

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.

[Huck]

Nor should we forget the US protectionist approach to foreign ownership of airlines,

Fair point, but that applies to the Sceptred Isle as well.

[gdiphil]

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/business/news/caa-relax-airline-ownership-rules-to-reduce-air-fares-421849.html
shows just how protectionist the Americans are.

[Seat62K]

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.....

[Airbubba]

Yep, maybe we need to hire BA to come tell us how to run an airline (send the Speedwing crew). And we can pay BAA to tell us how to run the airports.:)

[L-38]

For a peak into USA's future of air service, look to the ships docked in it's maritime harbors. ALL foreign registered and with Panamanian crews (or so)!

[sevenstrokeroll]

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.

[airfoilmod]

I don't care the cost of a ticket, it's too cheap. Too many people flying. It's oversold, attracts screaming models, barefoot folks with chickens or microdogs in their carry-on, noisy, smelly, dangerous. Why do I love it so.

[flite idol]

Skybus out of Columbus called it quits tonight!


http://www.dispatch.com/live/content/business/stories/2008/04/04/skybust.html

[Right Touch]

New thread just started suggests Skybus have called it a day as well.

[JuniorMan]

That is correct. Skybus will cease all operations tonight.

[Dani]

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

[Avman]

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).

[Viewfrom5Bells]

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 ?

[Mr @ Spotty M]

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.

[captjns]

http://www.usatoday.com/travel/news/...shutdown_N.htm (http://www.usatoday.com/travel/news/2008-04-04-skybus-shutdown_N.htm)

Very sorry to hear about S/B. Alot of good people put their hopes, dreams, and hard work into Skybus. Wishing those guys and gals good luck in finding positions else where in the world.

[PAXboy]

I'm sorry to hear about Skybus but they launched at the wrong end of the financial cycle. Even though the Sub-Prime problem had not emerged at launch (May 2007), it was clear that finances were down.

saccadePAXboy,
LCC's don't have low fares because they just happen to be an LCC. They sell their seats for the optimum price in order to maximize profit. FR is able to operate very thin routes because they can be profitable with relatively low yields. This might change with higher operating costs and hence: higher fares = capacity reduction.
Yes. I know all that and did not say otherwise. ALL airlines are going to suffer in the next two years. The ones in the US and Europe probably rather more than elsewhere.

Mercenerary Pilot
Original Quote from PAXboy:
Oh yes they will!!!!!! Everyone wants to pay less

Not everyone. I, like many other people I know, WILL pay extra for good customer service and some individual's/companies are prepared to pay a lot of money for better service hence the massive growth in the corporate aviation sector in Europe. Will this continue with the possible economic downturn? We shall see.I do not think that there will be sufficient numbers to keep carriers going. The corporates will shift down to Economy for short and medium haul and expect the Premium Economy to be popular for long haul. The LCCs will pick up more from corporates but then they will also lose more off the bottom end of their clients.

If a global bank lays off, say, 5,000 staff then those that used to travel for work are not even going to be in Economy!

Many more mergers and takeovers will happen. How are Delta and North West getting along? It looks as if they got talking just in time, although rationalisation will still be required.

[Graybeard]

Whenever there is a little oversupply, the price falls to the level of the dumbest competitor.

Jet Blue is now offering coach seats with about four inches more pitch/legroom in the forward half of the plane, at about $5 per hour premium. The majority are not paying it. All the bags must be going in the forward pit.

GB

[pasoundman]

mirdif
The good times may be over for the manufacturers as well, Skybus for instance had an order for 65 x 319s with Airbus.

Kingfisher will get their A320s early in that case !

[GlueBall]

1978 Airline Deregulation Act has nothing to do with the latest airline failures.

In a free market, airlines have an opportunity to live or die. Well managed airlines stay in business; poorly managed airlines disappear.

Why would the likes of idiot SkyBus managers who sell $10 seats and then go belly up need to be "protected" by a regulation?

Long live capitalism and the freedom to succeed and to fail.

[sevenstrokeroll]

if the airlines were still regulated, a "skybus" would have never flown.

then there would have been no downward pressure on legacy carriers to skimp on mx and the like.

it would be a stable industry, with stable jobs, stable profits and good service.

capitalism is just fine...when it is true capitalism.

I am of the era where the phone company, electric company, airlines, were regulated. And it all worked just fine.

Now, things are falling apart.

[PAXboy]

Yes, sevenstrokeroll, I think I now see more clearly where you are coming from. The stable management of utility services brings wealth to a country. In the UK, we introduced a 'light touch of regulation' in the 1980s from the then Conservative government. What that has translated into today is - almost no regulation at all.

Air travel is now - almost - a utility like water and electricity, as it is a fundamental component of modern life. In earlier days, first the coaches (horse, then motor) and then the railways were regulated so as to be fair to all. Airlines were never fair to all, they were regulated to be safe. Now - other than arranging bilateral agreements - they don't regulate at all. And you are right, it ain't working. Unfortunately, before it can be repaid - it has to actually break down and almost stop working. That is human nature.

[sevenstrokeroll]

Yes PAXBOY, you have the concept.

But, when REGULATION was in effect for the US airline industry, things were "fair".

When an airline lost money, the regulators allowed new routes and new fares to make sure the airline stayed in business.

When things got really bad, a fair merger was implemented with a healthier airline.

Small towns got very good air service for reasonable fares. Fares were adjusted on long haul routes to offset loses on short haul routes.

Slots at airports were controlled and landing and takeoff limits were controlled to make sure delays were under control ( wx aside).

In the good old days for example, small towns like Visalia, California rated regular service with B737 aircraft by United Airlines. Now the town is lucky to get small regional craft.

It might be very hard to understand in europe, but the cities of the American West are very far apart. Airline use is vital to connecting such cities.

Now, I'm not a fan of Musolinni...but he made the trains run on time.

a little regulation is good. too much and you get something you really don't want.

oh well, I'll drive when I have to. More control than flying! (in back that is)

[sevenstrokeroll]

when the airlines were regulated in the USA, it was said the Civil Aeronautics Board actually determined the size of ham sandwiches served on luncheon flights.

now you don't get any sandwiches.

that's progress?

[HolidayPilot]

G-ONADS

"Get your facts right please. Southwest has not cut any corners and is committed to bringing a safe and reliable product to its Customers"

I guess you haven't been keeping up with the news lately. The 10.2 Million dollar fine against them (The highest fine "ever" for a US airline) says otherwise.

[HolidayPilot]

Interesting to note that the carriers that have gone out of business this past week have all been on the lower end of pilot wages and work rules.

Pilot wages will not affect the survivability of an airline. The Legacy carriers aren't going anywhere. Maybe one will go bust. They have economies of scale that will allow them to ride out a downturn.

The airlines that will be in trouble are the ones receiving new airplanes. They have payments to make and cannot just park them to ride out the storm.

[sevenstrokeroll]

holiday pilot seems quite right...twice in a row.

my airline had a choice of refurbishing its fully owned fleet of jets or buying a new fleet of A320 types.

we did the later.

And went bankrupt twice.

but continues to fly.

another airline made the refurbishing choice and only went bankrupt once.

there you go! ;-)

[OldCessna]

Figure in the credit crunch for Aloha, ATA & Skybus. All three could not get access to any new funding!

You'll see some large & smaller carriers in the USA get hit the same way until credit becomes more available.

[PAXboy]

Excerpt from an article in The Independent about George Soros, 6th April 2008. http://www.independent.co.uk/news/business/news/soros-predicts-end-of-the-road-for-cheap-and-easy-borrowing-804978.html

In his new book, The New Paradigm for Financial Markets, he notes grimly that "the over valuation of the Euro and Sterling is going to hurt European economies".

Mr Soros's main concern, though, is for the dollar, whose status is being eroded by the credit crisis, pushing up import prices and causing a dilemma for those who want still more interest rate cuts to stimulate the US economy. "The Federal Reserve is constrained by the reluctance of the rest of the world to hold dollars," he said. "We face the double jeopardy of recession and inflation."


Echoing the themes of The New Paradigm, Mr Soros said: "Regulators have abandoned their duty by letting markets regulate themselves. It's because a market fundamentalist ideology has come to dominate the behaviour of market participants and market regulators over the past 25 years ... and the idea that markets are best left to their own devices became policy."

Says it all.

[ATPMBA]

You would think airlines would be able to pass the higher cost of fuel onto the passengers. In economics I believe they call it PRICING POWER. Perhaps they would rather go out of business then try to raise ticket prices?

If you are losing 1 dollar or pound per passenger then there is no way you are going to make it up on volume.

Airlines need to raise ticket prices or go out of business.

[sevenstrokeroll]

UPS and FEDEX can raise prices for boxes. so, people aren't worth as much as boxes?

what a world??!

[Desert Diner]

Figure in the credit crunch for Aloha, ATA & Skybus. All three could not get access to any new funding!

You'll see some large & smaller carriers in the USA get hit the same way until credit becomes more available.

I'm not sure the likes of Skybus (and perhaps Aloha/ATA) would have gotten new funding even if the economy was in good shape.

[PAXboy]

ATPMBAAirlines need to raise ticket prices or go out of business.Whilst there are enough carriers still around (legacy or LCC) they cannot do that. The standard process for carriers will be to have their prices as low as possible and chase the pax. It is still a buyer's market - but not for very much longer.

Once the recession is in full swing, a number of companies will fail and be either bought out, or just their customers picked up, also total pax numbers will fall a great deal. By the time it is all over - probably take another 24 months for the worst of it - then we will see what is left and prices may very well be higher. Capacity will also have been reduced significantly.

[OltonPete]

Now Frontier - Part of an article from USAToday

"DENVER (AP) — Frontier Airlines (FRNT) (http://stocks.usatoday.com/custom/usatoday-com/html-quote.asp?symb=FRNT) said it has filed for Chapter 11 bankruptcy protection, but unlike other airlines filing for bankruptcy this month, it plans to keep running while it reorganizes.
The low-fare carrier said its filing Friday came after an unexpected attempt by its principal credit card processor to start withholding significant proceeds from the sale of Frontier tickets, which threatened to hurt Frontier's liquidity.
The Chapter 11 filing in U.S. Bankruptcy Court in New York prevents the credit card processor from increasing its "holdback," Frontier CEO Sean Menke said.
"By filing for Chapter 11, we will now have the time and legal protection necessary to obtain additional financing and enhance our liquidity. Fortunately, we believe that we currently have adequate cash on hand to meet our operating needs while we take steps to further strengthen our company," Menke said in a statement."

Pete

[ATPMBA]

Frontier stated they will continue to fly but I thinlk passengers will not book flights with them out of fear of being stranding if they do decide to stop all flights. Pax would rather book with a "stable" airline.