Recession? - I Think not
Joined: Feb 2000
Aviation Qualifications: ATPL
Posts: 17,498
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From: England
Well its certainly true that there traditionally is a 10 year cycle which last hit in 1990/1991 so perhaps here we go again...
Scroggs, helmets on and lets double the ration stores in the bunker because the Wannabes forum might soon be swamped... :-(
WWW
Scroggs, helmets on and lets double the ration stores in the bunker because the Wannabes forum might soon be swamped... :-(
WWW
Joined: Apr 2001
Posts: 871
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From: Chichester, UK
If you'll excuse an outsider to the industry butting in, it seems to me like the problem for the airlines is going to be in business travel. To quote scroggs,
We don't make money from bucket loads of £39 return fares - we make it from the few £500+ business returns.
You pay a hell of a lot more money for a couple of glasses of less-cheap chardonnay and a bit more leg room. 30 seconds on www.british-airways.com got me a quote for £4k 
for a 1 week business class return from LHR to ORD. I fly that route regularly in economy (family in Chicago), and I doubt I've ever spent more than £400 for the ticket.
When the travel bill got out of hand at a company I used to work for, they offered us a choice. Business class as before, or Economy and a "subsistence" payment that could be up to £500. That's a taxable benefit, of course, but in effect you got to do whatever you wanted with the money. The prospect of money in your pocket won most times - signing away a hundred quid or more for a bigger seat made people feel they were paying for it...
My point is just that relying on those few £500+ fares seems dangerous to me. You pay a lot more for not much, and the people paying the bills are increasingly aware of that.
Arriving "ready for business" is also a fallacy when it is cheaper to send the staff a day earlier than to buy the ticket. Ultimately if the business class fares just dry up then economy fares will have to go up, but that's just going to drive more people away...
(Edited for UBBcode ineptness)
[ 08 August 2001: Message edited by: Evo7 ]
We don't make money from bucket loads of £39 return fares - we make it from the few £500+ business returns.
for a 1 week business class return from LHR to ORD. I fly that route regularly in economy (family in Chicago), and I doubt I've ever spent more than £400 for the ticket. When the travel bill got out of hand at a company I used to work for, they offered us a choice. Business class as before, or Economy and a "subsistence" payment that could be up to £500. That's a taxable benefit, of course, but in effect you got to do whatever you wanted with the money. The prospect of money in your pocket won most times - signing away a hundred quid or more for a bigger seat made people feel they were paying for it...
My point is just that relying on those few £500+ fares seems dangerous to me. You pay a lot more for not much, and the people paying the bills are increasingly aware of that.
Arriving "ready for business" is also a fallacy when it is cheaper to send the staff a day earlier than to buy the ticket. Ultimately if the business class fares just dry up then economy fares will have to go up, but that's just going to drive more people away...
(Edited for UBBcode ineptness)
[ 08 August 2001: Message edited by: Evo7 ]
Joined: Apr 1998
Posts: 945
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From: 18m N of LGW
Ooops! A boo boo! Bye Tom 
Sir Richard stated last weekend that while Virgin were doing good business, "it is time to batten down the hatches" for "the coming recession". Wise talk from a wise man in my view. Wondered why he was unloading a couple of financial business'!
Cosmo has made the point that a recession can be "scare talk" driven. That is a fair point in my view, but when the manufacturing industry goes into recession a huge succession of other industries follow them. In 1990/2 many thousands of business'went under, and a lot more than usual are going now, as we speak, according to Dun and 'Queerstreet's' figures. Bankruptcy's are on the increase too - all signs of a recession on it's way. The fallout will continue long after the recession is over too.
The airline industry - not necessarily the alliances - the independents, will have a tough time as they did 10 years ago. Less people going on holiday and less people travelling. If they have not made hay in the shoulder months April-October, they will have a problem if their reserves fail to sustain them. The low cost operators will almost certainly reap the benefits as cheaper fares are much sought after. The larger carriers, will bear the brunt of the downturn, and the alliances will pick up more business from the travel industry, some of whom will also tumble under the pressure. This will leave a hard cell from the airlines and the travel trade to carry on. No-one daring to put their heads above the parapet until it looks like it's all over. Then the cycle begins all over again. That is how it happened before, so history will more than likely repeat itself.
My two operations flew through two recessions in the 70's and 80's. But only because the core business did not rely on carrying people. But we still had to batten down the hatches.
How long it will last is anybody's guess. There will be guesstimates from the City and everywhere else, from all kinds of so-called pundits. The fact is it will last as long as takes. Simple but true.
Sir Richard stated last weekend that while Virgin were doing good business, "it is time to batten down the hatches" for "the coming recession". Wise talk from a wise man in my view. Wondered why he was unloading a couple of financial business'!
Cosmo has made the point that a recession can be "scare talk" driven. That is a fair point in my view, but when the manufacturing industry goes into recession a huge succession of other industries follow them. In 1990/2 many thousands of business'went under, and a lot more than usual are going now, as we speak, according to Dun and 'Queerstreet's' figures. Bankruptcy's are on the increase too - all signs of a recession on it's way. The fallout will continue long after the recession is over too.
The airline industry - not necessarily the alliances - the independents, will have a tough time as they did 10 years ago. Less people going on holiday and less people travelling. If they have not made hay in the shoulder months April-October, they will have a problem if their reserves fail to sustain them. The low cost operators will almost certainly reap the benefits as cheaper fares are much sought after. The larger carriers, will bear the brunt of the downturn, and the alliances will pick up more business from the travel industry, some of whom will also tumble under the pressure. This will leave a hard cell from the airlines and the travel trade to carry on. No-one daring to put their heads above the parapet until it looks like it's all over. Then the cycle begins all over again. That is how it happened before, so history will more than likely repeat itself.
My two operations flew through two recessions in the 70's and 80's. But only because the core business did not rely on carrying people. But we still had to batten down the hatches.
How long it will last is anybody's guess. There will be guesstimates from the City and everywhere else, from all kinds of so-called pundits. The fact is it will last as long as takes. Simple but true.
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Joined: Dec 1997
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From: Suffolk UK
Evo,
spot on, basically - although I bet your company would never pay £4K for a Chicago ticket! The £500 sweetener for going economy is not uncommon in tight times, but as things improve, the purse strings loosen. The low cost (see Ryanair), and economy-passenger-driven businesses (e.g. Virgin) will survive through this recession, but BA's move upmarket may well prove to have been badly timed.
The big keyword in any competetive business at times like this is costs. If you've the fat to reduce the costs without significantly affecting the product, you'll survive - unless there's just too much fat! Fares just pennies cheaper than the competition's will get those all-important corporate contracts - or, at least, those that survive the push toward video conferencing and other ways of bypassing the need to travel.
The bucket-and-spade industry will have to survive on a significantly reduced market, if the domestic consumer stops spending (no sign of this yet). Inevitably, there will be casaulties. There always are - Air Europe, Dan Air and British Caledonian spring to mind last time round.
The saving grace this time is that inflation, and thus interest rates, are low. This means that companies' debts won't get out of hand as they did in the early '90s, and that reinvestment will come quickly once the bosses feel that the worst is over.
As for jobs, I think that the low-cost carriers (Ryan, EZ, Go, Buzz, etc) will collectively do well, although there may be some rationalisation. Ryanair are looking for 50 737s right now. Their recruiting is bound to contiue strongly - and they have enough money in the bank to ride the rough bits out. Keep the faith, it's not a disaster. But it will be tighter than it has been for a while.
[ 08 August 2001: Message edited by: scroggs ]
spot on, basically - although I bet your company would never pay £4K for a Chicago ticket! The £500 sweetener for going economy is not uncommon in tight times, but as things improve, the purse strings loosen. The low cost (see Ryanair), and economy-passenger-driven businesses (e.g. Virgin) will survive through this recession, but BA's move upmarket may well prove to have been badly timed.
The big keyword in any competetive business at times like this is costs. If you've the fat to reduce the costs without significantly affecting the product, you'll survive - unless there's just too much fat! Fares just pennies cheaper than the competition's will get those all-important corporate contracts - or, at least, those that survive the push toward video conferencing and other ways of bypassing the need to travel.
The bucket-and-spade industry will have to survive on a significantly reduced market, if the domestic consumer stops spending (no sign of this yet). Inevitably, there will be casaulties. There always are - Air Europe, Dan Air and British Caledonian spring to mind last time round.
The saving grace this time is that inflation, and thus interest rates, are low. This means that companies' debts won't get out of hand as they did in the early '90s, and that reinvestment will come quickly once the bosses feel that the worst is over.
As for jobs, I think that the low-cost carriers (Ryan, EZ, Go, Buzz, etc) will collectively do well, although there may be some rationalisation. Ryanair are looking for 50 737s right now. Their recruiting is bound to contiue strongly - and they have enough money in the bank to ride the rough bits out. Keep the faith, it's not a disaster. But it will be tighter than it has been for a while.
[ 08 August 2001: Message edited by: scroggs ]
Thread Starter
Joined: Jan 2000
Posts: 955
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From: UK
The UK travel operator Airtours gave an upbeat statement about future prospects.
The company said pre-tax profits for the three months to 30 June were £4.2m, in comparison to a loss of £2m in the same period last year.
Summer bookings were up 12% in the UK, while group bookings for the winter are also up 9%.
The company's chairman David Crossland said he was "extremely pleased" with the results.
Some recession...
The company said pre-tax profits for the three months to 30 June were £4.2m, in comparison to a loss of £2m in the same period last year.
Summer bookings were up 12% in the UK, while group bookings for the winter are also up 9%.
The company's chairman David Crossland said he was "extremely pleased" with the results.
Some recession...
