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USA Today: Airline Recession Bottoming Out?  
User currently offlineBigGSFO From United States of America, joined Jun 2005, 2933 posts, RR: 6
Posted (5 years 1 month 2 weeks 5 hours ago) and read 4131 times:

From this morning's USA Today:
http://www.usatoday.com/travel/fligh...s/2009-09-08-airline-outlook_N.htm

Article speculates that we are starting to see a light at the end of the tunnel (if that light is an oncoming train remains to be seen). Record losses are still predicted, but there appears to be signs signaling a bottoming out.

This isn't that out of line. Although we are still in global recession, it does seem that we are starting to climb out of it. However I don't expect a windfall of jobs or spending to go back to the way it was.

Hopefully we will see better days soon.

Thoughts?

16 replies: All unread, jump to last
 
User currently offlineKappel From Suriname, joined Jul 2005, 3533 posts, RR: 17
Reply 1, posted (5 years 1 month 2 weeks 5 hours ago) and read 4090 times:

Yes, it does seem that it is bottoming out. But all that means right now is that the decline is not as steep as it once was. I do firmly believe that the worse is over. More and more indicators (not just in aviation) are pointing that way.

I hope this doesn't mean that the time for these great airfares we've been seeing lately is over  Sad



L1011,733,734,73G,738,743,744,752,763,772,77W,DC855,DC863,DC930,DC950,MD11,MD88,306,319,320,321,343,346,ARJ85,CR7,E195
User currently offlineBigGSFO From United States of America, joined Jun 2005, 2933 posts, RR: 6
Reply 2, posted (5 years 1 month 2 weeks 5 hours ago) and read 4075 times:



Quoting Kappel (Reply 1):
I hope this doesn't mean that the time for these great airfares we've been seeing lately is over

Considering overall airfares haven't increased much in 20 years, probably not. There will always be airfare sales.  Wink


User currently offlineClemsonaj From United States of America, joined Aug 2009, 271 posts, RR: 0
Reply 3, posted (5 years 1 month 2 weeks 5 hours ago) and read 4046 times:

As a grad student I hope airfares remain at this level for a long time, however I realize that the airlines can't continue to charge $200 for an east coast - west coast trip. Look for airlines to keep the current capacity levels near term with very limited growth in the future. If air travel picks up so with the fares. I would like to think that the airlines would be a lot more cautious in the future about adding tons of capacity, however that might not be the case.

User currently offlineKappel From Suriname, joined Jul 2005, 3533 posts, RR: 17
Reply 4, posted (5 years 1 month 2 weeks 5 hours ago) and read 3972 times:



Quoting Clemsonaj (Reply 3):
however I realize that the airlines can't continue to charge $200 for an east coast - west coast trip.

No they can't. Next month I'm flying AMS-MUC-SIN-MUC-SIN for EUR 400. That's an irresistable fare that won't come again anytime soon.

And to be honest, I'd rather pay a bit more and have a healthy airline industry than the current situation. But, I've never flown as much as the past year thanks to these fares. I've tried to do my part to help the industry  Wink



L1011,733,734,73G,738,743,744,752,763,772,77W,DC855,DC863,DC930,DC950,MD11,MD88,306,319,320,321,343,346,ARJ85,CR7,E195
User currently offlineClemsonaj From United States of America, joined Aug 2009, 271 posts, RR: 0
Reply 5, posted (5 years 1 month 2 weeks 4 hours ago) and read 3848 times:



Quoting Kappel (Reply 4):
I've never flown as much as the past year thanks to these fares.

No kidding. Now if I can just get them to honor those frequent flier miles I have saved up....


User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 6, posted (5 years 1 month 2 weeks 4 hours ago) and read 3838 times:

While things are improving, the winter will be as long as it usually is and that means lots of days when airlines lose money just keeping the doors open. The slowing rate of decline over the winter provides hope that next summer might mark an upturn but the game plan will still be just to hang on for the next 9 months.

User currently offlineLightsaber From United States of America, joined Jan 2005, 13253 posts, RR: 100
Reply 7, posted (5 years 1 month 2 weeks 3 hours ago) and read 3695 times:
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I'm glad to hear there are signs that the airline recession is slowing. But sadly, most airlines have not adapted to the current low-premium market. We have had threads on declining J/F demand and even one today on AF possibly pulling our their domestic business seats as not enough are selling!  Sad Sadly, the impact on employees stops ~18 months after the recession ends.

Quoting Kappel (Reply 1):
Yes, it does seem that it is bottoming out. But all that means right now is that the decline is not as steep as it once was. I do firmly believe that the worse is over. More and more indicators (not just in aviation) are pointing that way.

 checkmark  Unfortunately, the Baltic Dry Index has fallen again. Anything below 3500 points to declining world trade over the next ~6 months. I speculate this will depress airline yeilds as less trade means fewer flights to expidite goods and services.

I do not like being an economic bear, but there are signs this winter isn't going to be a recovery:

http://www.bloomberg.com/apps/quote?ticker=BDIY%3AIND

Quoting Clemsonaj (Reply 3):
Look for airlines to keep the current capacity levels near term with very limited growth in the future.

Actually, the time to bleed is over. Due to the projected slow nature of the recover, its best to park aircraft (contract) to be as strong as possible during the recovery. Airlines are far too low margin a business to keep up service levels during depressed demand.

Quoting WorldTraveler (Reply 6):
but the game plan will still be just to hang on for the next 9 months.

The first hope I have is for next summer's travel season. Coworkers are normally booking their TPAC trips now for the winter. All are holding off to see if things improve (despite secure jobs, but paid overtime is gone). These same people made an anual trip home, in J, to their home countries every year.

Why no trips? Debt and the inability to borrow further against their homes for another trip. The debt load on the average consumer is going to make this recovery slow. I've watched people go from a net $200k in savings to a net $200k in additional debt. That $400k difference provided one hell of a lifestyle over the last 7 years, but now its time to pay the piper. Sadly, the travel industries look set to take the brunt of the pain. I want airlines to grow... but now is the time to survive.

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineLAXintl From United States of America, joined May 2000, 25741 posts, RR: 50
Reply 8, posted (5 years 1 month 2 weeks 3 hours ago) and read 3646 times:

One very important thing to keep in mind --- year over year comparisons will be useless going forward as the steep decline started Q3 last year. So having only -2% decline in August 2009 might seem good, but the real decline from 2007 is still nearly 20%.

To highlight this last week a trade magazine broke a story that Trans Pacfic cargo tonnage in July09 for the first time was down in single digits -- all good news until the UPS press spokesman reminded everyone that tonnage is low as ever still, down nearly 30% from 2007!

So yes while it seems the US particularly might have bottomed out, the global economies are far from recovered and this could be a long cold winter ahead for business still.

Oh and another issue for airlines with a recovering economy will be fuel -- its already sitting at historical high'ish $70/bbl these days and likely to only rise as demand for the product comes back.



From the desert to the sea, to all of Southern California
User currently offlineFlyDeltaJets87 From , joined Dec 1969, posts, RR:
Reply 9, posted (5 years 1 month 2 weeks 1 hour ago) and read 3542 times:



Quoting Clemsonaj (Reply 5):

No kidding. Now if I can just get them to honor those frequent flier miles I have saved up....

Which carrier do you fly with? I've overall had good success using Skymiles with DL. In fact, I'm flying MCO-LAX over New Years and was able to get First/Business Elite for the minimum amount on a ticket booked less than a month ago.

Quoting Clemsonaj (Reply 3):
As a grad student I hope airfares remain at this level for a long time, however I realize that the airlines can't continue to charge $200 for an east coast - west coast trip

I know what you mean. I was able to go to Michigan for a wedding from MCO for only $160 including taxes on NW (DL). My girlfriend flew down from Michigan a few weeks ago to Florida for the same price. Back in January went up to NYC for $199 on JetBlue (paid $20 more each way for the extra leg room). I've seen the fares to fly up to Ohio come down since I've been here in Florida (I'm going DAB-CMH in a couple weeks for only $228) but to get home to North Carolina, the airfares stayed about the same, especially out of Daytona Beach, in the four years I've been down here. (DAB-RDU routinely cost me $300 or more to fly home. I've paid as much as $375, even booking well in advance).


User currently offlineClemsonaj From United States of America, joined Aug 2009, 271 posts, RR: 0
Reply 10, posted (5 years 1 month 1 week 6 days 23 hours ago) and read 3431 times:



Quoting FlyDeltaJets87 (Reply 9):
Which carrier do you fly with? I've overall had good success using Skymiles with DL. In fact, I'm flying MCO-LAX over New Years and was able to get First/Business Elite for the minimum amount on a ticket booked less than a month ago.

I typically fly DL or their partners. I'm trying to save up for a trip across the pond, although I've been reading lately that it's pretty difficult to get an award ticket for TATL.


User currently offlineFlyDeltaJets87 From , joined Dec 1969, posts, RR:
Reply 11, posted (5 years 1 month 1 week 6 days 23 hours ago) and read 3344 times:



Quoting Clemsonaj (Reply 10):

I typically fly DL or their partners. I'm trying to save up for a trip across the pond, although I've been reading lately that it's pretty difficult to get an award ticket for TATL.

The opposite of what it used to be. In 2004 we first tried to use our Skymiles to go to Hawaii (we called in January for a trip in June) and there was no availability for the 35,000 seats but the agent was trying really hard to get us to go to Europe since they had plenty of availability. That summer (July 4th), we called right at midnight for 331 days out of our departure date for Hawaii in 2005 and had no problem getting the tickets. I also flew to Portland, Oregon that same year on Skymiles on a 25,000 mile ticket, getting the flights I needed (and booked only a couple weeks in advance). I've also flown to San Antonio and to Cincinnati on the Skymiles. The only time that was somewhat difficult was when I went to Cincinnati, I had to play with different cities in the area I was leaving from (JAX, DAB, and MCO) and had to settle for JAX to get the dates and mileage amount that I needed, and I had to NW for the flight coming back, but I still got to and from CVG at the dates and times I needed.


User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4507 posts, RR: 34
Reply 12, posted (5 years 1 month 1 week 6 days 22 hours ago) and read 3287 times:

Oh and another issue for airlines with a recovering economy will be fuel -- its already sitting at historical high'ish $70/bbl these days and likely to only rise as demand for the product comes back.

A substantial rise in the price of oil seems to me unlikely. If suppliers and speculators try to drive the price up again as they did in the *very* different economic context of summer 2008, they will most likely encounter the rude and swift price discipline of a drop in demand from economies (let alone airlines) that are in no condition to take such games this year, and aren't going to be in any condition to do so anytime soon.

Jim



Need a new airline paint scheme? Better call Saul! (Bass that is)
User currently offlineLAXintl From United States of America, joined May 2000, 25741 posts, RR: 50
Reply 13, posted (5 years 1 month 1 week 6 days 14 hours ago) and read 3099 times:

Well the forward market curve has fuel running up to $85 range in the short term. Remember also we are fast up from the sub $40/bbl range only 6mos ago.
To me its quite plausible we are looking at $100/bbl fuel in the next few years particularly as export economies like India and China come back.



From the desert to the sea, to all of Southern California
User currently offlineAither From South Korea, joined Oct 2004, 859 posts, RR: 0
Reply 14, posted (5 years 1 month 1 week 6 days 12 hours ago) and read 2775 times:

The signs of recovery are good news but the operating environment for the airlines will remain way more challenging compared to the last 30 years.

I think it's time for the industry to consolidate - ok people have been saying that for the last 30 years. There are over 700 airlines with scheduled passengers traffic, many competing on the same markets. There are just too many frequencies on the same routes (long haul one flight is enough per route, short haul no more than 1 flight for the same every 2 hours). All of these are great sources of global inefficiency.

We have to modify ownership restrictions, increase code/sharing airline cooperation to improve the efficiency of operations at the route level, also it's about time ATCs enter the 21st century as well as many airports. Governments should pay for the security checks (do the railway system pay for the police in the train stations ?)

This winter will be deadly for many airlines. After 30 years of inefficiency I believe the airline industry now has no choice but to make structural changes and not just some airline operating adjustments like removing onboard magazines to save fuel.



Never trust the obvious
User currently offlineBurkhard From Germany, joined Nov 2006, 4399 posts, RR: 2
Reply 15, posted (5 years 1 month 1 week 6 days 8 hours ago) and read 2369 times:

@Aither : Thanks, very well said.

There is a realistic hope that global economy numbers can be back to 2007 numbers in 2010 to 2013 - but we will not jump back onto the growth path as it happened after 9/11 or SARS as if nothing had happened. Which also means that there about 15% less aircraft needed in 2015 as planned in 2005.


User currently offlineClemsonaj From United States of America, joined Aug 2009, 271 posts, RR: 0
Reply 16, posted (5 years 1 month 1 week 6 days 5 hours ago) and read 1970 times:



Quoting FlyDeltaJets87 (Reply 11):

Thanks for the info. I'll keep that in mind.


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