Growing evidence that the downturn is upon us....
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Re-heat.
Capacity means nothing.... My point was that house prices etc had not had an effect on capacity.
You are absolutly right. However, the point I was making was that there was no shortage of demand due to the punter not wanting to spend money as a result of a 'technical recession'.
Zooms business model was based on low cost flights with low'er' ..much lower fuel costs. I suspect that their market would still have been there if they had the balls to reshape the business model and put fares up.
With regard to property prices, again you are correct, Glasgow itself has shown a decrease of around 1% over the YEAR. But...Glasgow is just where the Airport happens to be. The rest of Scotland ...which is where the market is, has shown a year on year increase of 9%!
Capacity means nothing.... My point was that house prices etc had not had an effect on capacity.
You are absolutly right. However, the point I was making was that there was no shortage of demand due to the punter not wanting to spend money as a result of a 'technical recession'.
Zooms business model was based on low cost flights with low'er' ..much lower fuel costs. I suspect that their market would still have been there if they had the balls to reshape the business model and put fares up.
With regard to property prices, again you are correct, Glasgow itself has shown a decrease of around 1% over the YEAR. But...Glasgow is just where the Airport happens to be. The rest of Scotland ...which is where the market is, has shown a year on year increase of 9%!
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What utter tripe...house prices dropping coupled with high inflation and job losses put many many people in negative equity and unable to meet the monthly mortgage payments. When the inevitable happens and the house is reposessed they still owe the bank money even after losing their home.
Quite how you can say house prices falling at there fastest rate for 2 decades is a good thing is quite beyond comprehension.
A correction for some might be a good thing is they have thousands saved up ready to go - perhaps. For the economy in general is is a pretty godd indicator we are heading for recession!
Quite how you can say house prices falling at there fastest rate for 2 decades is a good thing is quite beyond comprehension.
A correction for some might be a good thing is they have thousands saved up ready to go - perhaps. For the economy in general is is a pretty godd indicator we are heading for recession!
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According to a recent report (Feb) by a Memeber of the Monetary Policy Committee (see here: http://www.bankofengland.co.uk/publi.../speech335.pdf) if house prices fall by 15% in 2008, that would result in 5% of people with mortgages being left in negative equity (which is 2% of householders overall).
The interesting point is the drop in value of property linked to the financial markets, and the squeeze on the mortgage industry. Combine this with people being released off a low interest rate fixed 3 year deal into the new environment, and although they may not have negative equity, they may still be either on the edge, or unable to make repayments.
It's quite an interesting read, although events are moving quite quickly - and with all the media talk of job losses/bankruptcies etc the slow down/recession may become a self fulfilling prophecy.
Say it enough times, and everyone will believe it unfortunately.
The interesting point is the drop in value of property linked to the financial markets, and the squeeze on the mortgage industry. Combine this with people being released off a low interest rate fixed 3 year deal into the new environment, and although they may not have negative equity, they may still be either on the edge, or unable to make repayments.
It's quite an interesting read, although events are moving quite quickly - and with all the media talk of job losses/bankruptcies etc the slow down/recession may become a self fulfilling prophecy.
Say it enough times, and everyone will believe it unfortunately.
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Mortgage Equity Withdrawal in the UK
According to the Council of Mortgage Lenders equity withdrawal increased from £10 billion in 1984 to £23 billion in 1988. http://www.cml.org.uk/cml/filegrab/p...f.pdf?ref=3854
Rex, think about Mortgage Equity Withdrawal. The great cash machine in the sky that supports so so many peoples lifestyles in the UK.
That huge money tap just stopped gushing. Never mind the negative equity people - of which there will be 1 million by the end of the year. ALL THAT MEW MONEY IS NOT GOING TO BE IN NEXT YEARS ECONOMY!
Look at the last time this happened. After the recession (and fall in house prices) of 1992 UK equity withdrawal fell to £12.5 billion from £17.8 billion.
By 2000, equity withdrawal had increased to £30 billion. During this period there was a steady rate of economic growth.
The Bank of England report that mortgage equity withdrawal has continued to rise since 2000. Can you guess what it was last year? Can you guess what its going to be next year? Can you guess what those missing tens of Billions of Pounds is going to do to the consumer economy?
Money is disappearing so fast its heart stopping. Just like airlines will be soon.
According to the Council of Mortgage Lenders equity withdrawal increased from £10 billion in 1984 to £23 billion in 1988. http://www.cml.org.uk/cml/filegrab/p...f.pdf?ref=3854
Rex, think about Mortgage Equity Withdrawal. The great cash machine in the sky that supports so so many peoples lifestyles in the UK.
That huge money tap just stopped gushing. Never mind the negative equity people - of which there will be 1 million by the end of the year. ALL THAT MEW MONEY IS NOT GOING TO BE IN NEXT YEARS ECONOMY!
Look at the last time this happened. After the recession (and fall in house prices) of 1992 UK equity withdrawal fell to £12.5 billion from £17.8 billion.
By 2000, equity withdrawal had increased to £30 billion. During this period there was a steady rate of economic growth.
The Bank of England report that mortgage equity withdrawal has continued to rise since 2000. Can you guess what it was last year? Can you guess what its going to be next year? Can you guess what those missing tens of Billions of Pounds is going to do to the consumer economy?
Money is disappearing so fast its heart stopping. Just like airlines will be soon.
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Times up.
UK mortgage equity release figures soar - Times Online
This time last year this article says:
UK mortgage equity release figures soar
Householders are taking cash out of the rising equity in their homes at the fastest rate for two-and-a-half years
House price rises and a squeeze on disposable incomes led to a steep increase in the amount of cash people took out of their homes last year to fund their spending.
The figures will worry hawks on the Bank of England's Monetary Policy Committee, which meets this week to discuss interest rates. The MPC is widely expected to keep rates on hold this month, although economists are predicting another increase before the summer.
Figures from the Bank of England showed that mortgage equity withdrawal (MEW) rose to £14.6 billion in the fourth quarter of 2006, up from £12.2 billion in the previous three months.
For the full year, MEW totalled £49.7 billion in 2006, up from £36.6 billion in 2005. Economists said that the increase helped to bolster spending on the high street amid slower growth of unsecured debt.
Do you see?
In 2006 people took £36.6 billion out of their homes and spent it on stuff. In 2007 they did the same until Northern Rock exploded.
That money, magically conjured from the thin air of a house price bubble, is now gone. Its not being replaced by anything. Nothing. Nowt.
The party is over. The booze has run out. The police are coming up the driveway and Mum and Dad are home soon.
£10's of BILLIONS of pounds of consumer spending WILL NOT HAPPEN this year nor next from the heart attack that the MEW god has suffered. Quite a bit of that spending was on air fares.
This has all happened before. People here were warning you. Perhaps you thought that, this time, its different.
?
UK mortgage equity release figures soar - Times Online
This time last year this article says:
UK mortgage equity release figures soar
Householders are taking cash out of the rising equity in their homes at the fastest rate for two-and-a-half years
House price rises and a squeeze on disposable incomes led to a steep increase in the amount of cash people took out of their homes last year to fund their spending.
The figures will worry hawks on the Bank of England's Monetary Policy Committee, which meets this week to discuss interest rates. The MPC is widely expected to keep rates on hold this month, although economists are predicting another increase before the summer.
Figures from the Bank of England showed that mortgage equity withdrawal (MEW) rose to £14.6 billion in the fourth quarter of 2006, up from £12.2 billion in the previous three months.
For the full year, MEW totalled £49.7 billion in 2006, up from £36.6 billion in 2005. Economists said that the increase helped to bolster spending on the high street amid slower growth of unsecured debt.
Do you see?
In 2006 people took £36.6 billion out of their homes and spent it on stuff. In 2007 they did the same until Northern Rock exploded.
That money, magically conjured from the thin air of a house price bubble, is now gone. Its not being replaced by anything. Nothing. Nowt.
The party is over. The booze has run out. The police are coming up the driveway and Mum and Dad are home soon.
£10's of BILLIONS of pounds of consumer spending WILL NOT HAPPEN this year nor next from the heart attack that the MEW god has suffered. Quite a bit of that spending was on air fares.
This has all happened before. People here were warning you. Perhaps you thought that, this time, its different.
?
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Lower house prices = LOWER CONSUMER CONFIDENCE (tied in with the "wealth effect"?) = Less willingness to spend/borrow = less money spent on weekend breaks/holidays = less airtravel = less demand for pilots etc etc.
It isn't really that hard to understand is it??
Also for the likes of the legacy airlines most of the profitability comes form business class travel. Anyone working in a large corporate can tell you that getting those expensive business class flights signed off is becoming tougher and tougher.
I would love to be upbeat but to be frank I think it will get worse before it gets better. So much so that I am ditching the good ol' UK and relocating to the Middle East for 2-3 years this weekend! Wooohoo sun and sand here I come..... don't think I will miss much here.. I would put money on house prices being at least 10% lower in 3 years time in both nominal and real terms.
It isn't really that hard to understand is it??
Also for the likes of the legacy airlines most of the profitability comes form business class travel. Anyone working in a large corporate can tell you that getting those expensive business class flights signed off is becoming tougher and tougher.
I would love to be upbeat but to be frank I think it will get worse before it gets better. So much so that I am ditching the good ol' UK and relocating to the Middle East for 2-3 years this weekend! Wooohoo sun and sand here I come..... don't think I will miss much here.. I would put money on house prices being at least 10% lower in 3 years time in both nominal and real terms.
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Surely people have to rent somewhere if they don't buy a friggin house.... Rex I admire your British stiff upper lip in the face of adversity and over whelming odds.... we built an empire on it.... 
However arguing lower house price don't matter is a tough one.... what about the UK building firms laying of hundreds of people? Estate agents? Lawyers/solicitors, surveyors, etc etc... lower house prices = lower activity.... it impacts the economy in many many ways.
Look at the evidence...
Consumer retail sales numbers plummeting
Consumer confidence weakest in years.
Banks can't lend because no-one will lend to them
Unemployment rising.
I respect your opinion but just can't see the logic in the point you are trying to make other than "recessions happen because the media puts everyone in a bad mood"??
However arguing lower house price don't matter is a tough one.... what about the UK building firms laying of hundreds of people? Estate agents? Lawyers/solicitors, surveyors, etc etc... lower house prices = lower activity.... it impacts the economy in many many ways.
Look at the evidence...
Consumer retail sales numbers plummeting
Consumer confidence weakest in years.
Banks can't lend because no-one will lend to them
Unemployment rising.
I respect your opinion but just can't see the logic in the point you are trying to make other than "recessions happen because the media puts everyone in a bad mood"??
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A quick intro to the "wealth effect" for those of us who are not economists; courtery of The Economist.
Finally, if the media were solely responsible for the nation's bad mood, the Daily Mail would be creating a nation of suicidal middle class parents. I somewhat think their influence is overstated...
In America the tangible impact of the housing slump is plain to see in the number of empty homes and in rising unemployment. There is greater uncertainty about the indirect effects of falling house prices, including the extent to which consumer spending will be held back by the “wealth effect”. Spending is largely driven by how much people earn in real terms today, but it is also affected by expectations about incomes tomorrow. An important part of future incomes is tied up in the assets—stocks, bonds, property—where household wealth is stored. When asset values fall, those who own them are poorer, hence they spend less and save more. When wealth increases, they spend more.
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Rex I agree it is a less than appealling British trait.... the British media is also awful.
G-SPOT I have taken that approach quite litterally.... my next post will be from Dubai! Good luck to one and all and anyone dropping through the region that fancies a beverage by the pool PM me!
Even if it goes tits up out there at least the sun will be shinning!
G-SPOT I have taken that approach quite litterally.... my next post will be from Dubai! Good luck to one and all and anyone dropping through the region that fancies a beverage by the pool PM me!
Even if it goes tits up out there at least the sun will be shinning!
Conerted_Lurker makes a valid point. Whilst I have retired somewhat from my role of doom monger the figures I have are as follows - draw your own conclusion, the numbers a chunky enough to make it fairly simple:
According to the latest figures from the Bank of England just £5 billion was released through MEW during the first quarter of 2008. This equates to 2.2 per cent of income after tax of all UK residents.
This was the lowest level since quarter 2 of 2001.
The figure is down from the £7.4 billion released in the (preceeding) last quarter of 2007 - £2.4 Billion of spending money stopped dead. Quarter three 2007 saw £11.4 billion withdrawn and the peak came in the first quarter 2007 at £13.9 billion. Early last year equity release schemes accounted for 6.3 per cent of income after tax in the UK.
Thats a lot of cash no longer circulating. And that, RexBanner, is why the housing market has such an effect on the domestic economy and therefore the airline business.
WWW
According to the latest figures from the Bank of England just £5 billion was released through MEW during the first quarter of 2008. This equates to 2.2 per cent of income after tax of all UK residents.
This was the lowest level since quarter 2 of 2001.
The figure is down from the £7.4 billion released in the (preceeding) last quarter of 2007 - £2.4 Billion of spending money stopped dead. Quarter three 2007 saw £11.4 billion withdrawn and the peak came in the first quarter 2007 at £13.9 billion. Early last year equity release schemes accounted for 6.3 per cent of income after tax in the UK.
Thats a lot of cash no longer circulating. And that, RexBanner, is why the housing market has such an effect on the domestic economy and therefore the airline business.
WWW
So by your logic then if the oil price fell back to $49 a barrel then everything would be fine for the airline industry. Business as usual, expansion, more pilots urgently needed?
My point was an overnight APD induced fare price rise that is very similar in size to the oil spike fare price rise didn't cause any problem at the time because:
a) The economy was growing strongly, and
b) The marginal cost of kerosene as a component price of a ticket is peanuts as part of the overall cost of the trip as a whole
I agree the economy itself is impacted by energy costs. But this is not the same as companies blaming the price of crude for their business failure. After all, none of them have a competitive advantage over one another when it comes to fuel price.
The consumer could easily and willing pay the (max) 25% fare price increase needed to cover the oil price going from $70 to $140 ** IF ** his house had gone up another £20k this year, his bonus had just been paid and he felt confident about the future.
Oil is a sideshow.
My point was an overnight APD induced fare price rise that is very similar in size to the oil spike fare price rise didn't cause any problem at the time because:
a) The economy was growing strongly, and
b) The marginal cost of kerosene as a component price of a ticket is peanuts as part of the overall cost of the trip as a whole
I agree the economy itself is impacted by energy costs. But this is not the same as companies blaming the price of crude for their business failure. After all, none of them have a competitive advantage over one another when it comes to fuel price.
The consumer could easily and willing pay the (max) 25% fare price increase needed to cover the oil price going from $70 to $140 ** IF ** his house had gone up another £20k this year, his bonus had just been paid and he felt confident about the future.
Oil is a sideshow.
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Remember that many of Zooms customers (half maybe?) were Canadians who, up until the last couple of months, had not experienced any drop in their house prices or any significant decline in the Canadian economy. I blame the oil price - the rocky British economy didn't help but wasn't the main cause.
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We are approaching the panic phase but look how much further there is to go - hysteria phase will need to be invented as this correction corrects itself 
£10's of BILLIONS of £'s of MEW derived spending isn't going to happen next year. Partly because the Equity has evaporated and partly because people won't feel confident to spend whatever remains. This alone is going to be like a 6% wage cut for the nation.
Add in the food/motoring/utility bill inflation related squeeze on disposable spending (airline tickets) and it don't take no genius like me to take it right back to 1991 - Aceeeeeeee'd!!! Illegal
rave anyone? I'll go get my whistle out of the attic.
£10's of BILLIONS of £'s of MEW derived spending isn't going to happen next year. Partly because the Equity has evaporated and partly because people won't feel confident to spend whatever remains. This alone is going to be like a 6% wage cut for the nation.
Add in the food/motoring/utility bill inflation related squeeze on disposable spending (airline tickets) and it don't take no genius like me to take it right back to 1991 - Aceeeeeeee'd!!! Illegal
rave anyone? I'll go get my whistle out of the attic.
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Originally Posted by 4567
What airlines would you say are close to collapsing next?
Imho WWW is right about oil, it's not the be all and end all of the problems, as higher interest rates and a higher cost of living takes effect with low or no pay rises (or bonuses) people will slowly stop traveling as much and now the UK isn't the cash cow for migrants it once was we'll be seeing less of them traveling to and fro. These are all facts that are regularly reported on.
The down turn is not going to happen over night, not everyone will feel the pinch straight away, indeed Ryan Air is still recruiting to meet current demand but at some point in the near future the drop in passenger numbers and the increase of pilot numbers will have to coincide and even Ryan Air will have to throttle back on recruitment.
btw regarding the title of the article I posted early 'the death of aviation', although I believe it makes some very valid points I don't think this is the end, oil prices will stabalise and we'll learn to live with them and once this economic down turn passes, as soon as people start making money again they forget all about their carbon footprints and green morals and celebrate with a couple of weeks in the Costa Del Sunshine or by some weekend shopping trips to New York. That's a couple of years away though (maybe more I don't know) imo and that's the time people should be aiming to finish their training by and hopefully benefit from an up turn in the aviation industry.
Last edited by ChrisLKKB; 29th Aug 2008 at 18:15.