Financial trouble ahead for the big US carriers - again
 

Here come the next round of pay cuts, bankruptcies and furloughs.

Well if the customers cannot afford to fly, who is there to pay the salary?

Pax have been given a free ride for too long on the backs of airline employees.
A good shack out in the industry will do a world of good.

Well I had an email here in the UK from FR yesterday offering me £35 for a £10 stake !

Is that just coincidental marketing by their gambling casino affiliate, or is there a cashflow crisis generally at the moment ? :p

... and anyway, I always find it most unseemly receiving an email from an airline inviting me to gamble :hmm:

How much do you think airfare would need to increase for a full domestic flight? $50...$75...$100?

I ,for one, would pay more if it meant that overall service improved and cabin crew treated SLF's like CUSTOMERS. After all, customers provide the pay checks. I'm tired of experiencing the surliness with my favorite carriers and would relish the return of "flying the friendly skies..."

""How much do you think airfare would need to increase for a full domestic flight? $50...$75...$100? ""

I thought US flights were always pretty full already. Average load factors are 85-90%, which in practice means flights at times most people actually want to travel are full. I don't think the problem is load factors, it's costs.

If this is the case then ticket prices are too cheap, you cannot maximise your revenue as an airline with high load factors! From a purely commercial POV High load factors mean seats being sold too cheaply!

Some scary news from easyJet:

Traditional network carriers like Air France KLM have slapped extra fuel surcharges on ticket prices in recent months to help compensate for soaring crude oil prices.

"If we ourselves passed on these increases completely we would have to raise ticket prices by 10 percent in one go and our payload factor (the proportion of seats sold) would fall from 85 percent to 60 percent. Our whole low-cost business model would be thrown into question," Bacchetta said.


http://www.reuters.com/article/marke...32471920080423


I can't believe this, is the low cost business model that fragile? No wonder ryanair is starting gambling games in order to make some money...

GCC...
 

I think maybe you missed my question...?

Business aviation dictates that when an aircraft is full, you achieve your optimum profit after operating costs. Assuming that airfare per customer is where revenue is achieved, I'm wondering where the range of increase would be to keep airlines going.

I'd still pay $50-100 more per ticket if that's what it took to experience a carrier that would put "service" back into the travel experience and also allow that carrier to meet it's operating costs.

I was curious if anyone had any guesses how much of an average increase is required for a domestic flight in order to bring carriers out of the nose dive.

Yellow Snow, I think that's right. But as the Irishman said when asked the way to Dublin, you don't start from here. Yet we are where we are now. Recent years have been devoted to boosting load factors so capacity can be cut (in the name of reducing costs). On the revenue side, however, the yield earned by the majors has been undercut by the low-cost airlines and, above all, by continuing high demand for travel, so much so that airlines don't need to place customer service as a high priority. Why should they when they can fill aircraft with zero service ! Of course, whether demand for travel will continue at the same levels in the current economic environment remains to be seen. I think the airlines themselves think it may not : hence further capacity reductions that have been announced in recent weeks (eg. United 4% reduction in overall seats).

One thing the major airlines in the US do have going for them is higher yield international flights, so the domestic low-cost people, in my view, may be even more vulnerable. A similar parallel may also exist in Europe.

Finally, on the cost side, US airlines were actually quite well hedged against rising fuel costs up to 2007. What we are seeing now is a double whammy : oil hedging at $60-70 no longer available, while the oil price has risen way above the $80-$100 or so that was expected last year.

What is the average ticket price then?

In September, when I last visited the US, my experience was that domestic legs were quite expensive, no matter whether bought separately or as part of an international ticket.

The connections I considered were IND - ROC (one way about as expensive as an international return ticket, still running at $600 to $850 depending on carrier and time of day if I tried to book a ticket now for travel two months from now), ROC - JFK (about $80 on Jetblue about what we pay on a legacy carrier in Europe with two month's advance booking) or ROC - EWR ($300 on Continental).

Admittedly, this is only a snapshot, but it doesn't sound like airlines are giving tickets away right now.

CityofFlightHistory says that you are in an absolute minority. In the world, everybody (99%) wants to get something for less. When money is tighter - like in a recession - then people either want to pay even less or will stop purchasing. That is what will happen (is happening) and, I suggest, it will happen globally AND not just in aviation.

You will soon either be paying more for your flight - irrespective of service levels - or not paying for it at all as the service will be closed.

Well, I'm with City of Flight on this one, what's more I back it with my wallet, Recently when I flew to Amsterdam for my son's wedding we went with a mainstream company rather than suffer the contempt we get from the low cost carriers. And we are OAPs on a limited income. I read of someone recently who would stay in a low cost hotel at the destination but fly first class on the grounds that the whole airport/plane thing was the most stressful part of any trip and to minimize that made absolute sense

The "PricePoint"
 

Flights are Full and generally oversold. This is due to (Partially) overpromoted and unrealistically low fare structure. It isn't unusual for a full A/C to lose money, after buybacks and Fuel cushion. The goal, as I see it is to raise fares to the point that "tickets sold reduction" is balanced by gross revenue. The off set is not easy to calculate, but the loss in numbers will most likely be in the area of customers who are flying "only" because it's Cheap. A friend Flew 757 coach roundtrip SMF to Philly for 190 Dollars (plus taxes) last week on Legacy. That's like buying a pint for a quarter. Lower load, better service, higher fare, the Old way. This can't continue.

Classic overcapacity. The herd must be culled. Don't be fooled by full airplanes - half of those pax aren't paying the costs associated with hauling them.....

Like the whole Dot.com era...when money is being funneled into a black hole, with little or no profit....it will implode.

The numbers of flights/day were scaled back to insure full flights. It's simple business. Since deregulation, airlines have struggled to contain the operating costs against profits and it's no secret it's one of the toughest industries to manage. While I don't know if $50-100 more per ticket would offset the status quo, I'm fairly confident that it wouldn't break the wallets of average pax. Regardless....it has to come from somewhere.

Until airlines can make an increase stick passengers will stick with the lowest price/time combo. There is no differentiation on safety or service so why not?
Are you going to offer your GM dealer an extra K just because they are having a hard time?

Looking at the recent round of mergers two drunks holding each other up comes to mind. Hate to say it but the best deal is let some outfits go under.

Sadly pilot seniority works against this. Looking the USAIR/AWA debacle you have to wonder if all would not have being better off with both going tits up and letting a newbie in. If pilots were truly mobile the newbie is going to end up paying at least market rates.

20driver

'when they can make it stick' Indeed 20driver, indeed that is the acid question.

I am sorry to be a pessimist but, having seen recessions before, by the time this one is in full swing people will not be picky about paying another $/£ 100 but can they get a flight at all? Aircraft and crews will be cut back very rapidly and then some carriers will have no choice but to close their doors. Capacity will be reduced and then fares will rise to realistic levels.

What will then be left between the old and new style carriers?? No one knows as this is all uncharted air space. Many uncomfortable times now on the doorstep.

BRE, living in Washington DC it is not uncommon for me to find fares to the west coast for under $250 and, with the exception of Christmas, I've never been forced to pay more than $300 for a flight to LA or SF. While there are certainly expensive flights out there, IND-ROC for example, there are plenty of others that are given away for peanuts.