Xkorpyoh From United States of America, joined Oct 2004, 819 posts, RR: 0 Posted (5 years 5 months 1 week 6 days 3 hours ago) and read 4614 times:
I see conflicting info regarding fares going up next year because of the lower capacity or that the fares will go down because the economic downturn and lower demand.
What do you think?
This is the view from AirlineForecasts:
"combination of plummeting oil prices and weak traffic likely will prompt substantial reductions in airfares next year, according to a new outlook by AirlineForecasts. Average fares next year should fall between 7% and 10%, and possibly as much as 12%, depending on fuel prices and traffic trends". "other key driver is reduced demand, especially from consumers beleaguered by shrinking home values, unemployment and other factors pinching their expenditures" "Traffic and load factors will be “horrible” first quarter of 2009, are seen as placing considerable downward pressure on fares, especially when combined with cheaper fuel" http://www.travelweekly.com/Article.aspx?id=182142
Isn't jet fuel more expensive than regular fuel and the price not dropping as sharply?
Is this pessimistic view realistic or are airlines controlling yield with capacity cuts?
I thought the airlines were finally able to increase fares to realistic levels and will keep it that way by focusing on good yields rather than market share that make them loose money.
What do you mean by "regular" fuel? Kerosine? Gasoline? Diesel?
Jet fuel is cheaper than gasoline, if that's what you mean.
As far as the question of prices up or down, I suspect steady or up.
If the demand slackens as is suggested in this article, then capacity will be cut to match it. Capacity is already on the downswing; if the carriers see that the capacity cuts weren't deep enough, I expect layoffs and parkings like never before.
OR, maybe they'll just come up with NEW FEES, and one by one lie and then get on the bandwagon. Like Delta and their recently implemented first bag fee.
I agree with you. I believe the legacy airlines would rather reduce capacity than lower fares.
The only new fee that comes to mind that airlines might introduce would be the carry-on-fees disguised as "priority boarding fees" like Ryanair has (basically, you board first to find space to put your carry-on bag))
regarding the fuel difference, I was referring to Jet-A fuel (similar to kerosene) being more expensive than gasoline used for cars.
"Typically, more kerosene can be extracted per gallon of crude than can of gasolines, making it cheaper in bulk. Molecular cracking has changed much of that in modern refineries, driving the cost of kerosene and diesel higher"