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The Future Of The Airline Industry  
User currently offlineBA From United States of America, joined May 2000, 11153 posts, RR: 59
Posted (12 years 9 months 2 weeks 19 hours ago) and read 2944 times:

As we all know, as a result of the September 11 attacks, airlines quickly dropped many flights due to the fall in passenger traffic.

However, its predicted to pick-up to pre-9/11 levels in the next 2 to 3 years.

However, the airline industry is reliant on business travelers for most part of the year.

As new long-range business jets are developed such as the Bombardier Global Express, and as business jets become more popular and more affordable, do you think the airline industry will suffer as a result of business travelers flying on there corporation's hi-tech, fast business jets?

I know its a long way off before many businesses start buying business jets, but it will happen. Jet aircraft are getting more and more economical. Regional Jets such as the CRJ and ERJ series are beginning to replace many of the roles performed by turboprops.

One day, business jets will be very economical and cheap to operate by businesses, thus demand for them will increase as businesses start buying them.

There is already high interest from businesses for the Bombardier Global Express, which is currently the longest range business jet.

How do you think this will affect the airline industry in the next 10 to 20 years?

Markets like Florida and Las Vegas will not suffer very much since they are reliant on leisure travelers. However, there are VERY VERY few markets in the world today that are mostly reliant on leisure travelers for most of the year.

Regards


"Generosity is giving more than you can, and pride is taking less than you need." - Khalil Gibran
22 replies: All unread, jump to last
 
User currently offlineRyefly From United States of America, joined Jun 2000, 1396 posts, RR: 0
Reply 1, posted (12 years 9 months 2 weeks 14 hours ago) and read 2858 times:

While it's true that there is a great selection of business jets these days, it's still considered a luxury item for which many companies can't justify doing by themselves. Some moderate to large companies go into a time share with other companies on a jet. This splits up the amazing cost of not only the plane itself, but crew, maintenance, fuel, storage, etc... etc... etc...

For the most part, a good majority of companies will continue to fly on airlines, not only for cost purposes, but because there is an amazing amount of supply. You can pretty much fly to anywhere in the world when you want to from anywhere with maybe only one or two stops. For short distances, companies will most likely give you a car, or pay you for mileage on your car, rather then buy a airline ticket. It all breaks down to economics and if there is enough demand to buy a plane or not.


User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4514 posts, RR: 34
Reply 2, posted (12 years 9 months 2 weeks 6 hours ago) and read 2833 times:

I'm with RyeFly on the question of demand for airline business travel. Smaller businesses are on the increase in the US, and most of them probably won't even buy into fractional ownership. And business people don't get FF miles on corporate jets.

In the US at least, we'll probably see the current trend continue. Well-managed, high-quality low-fare carriers are now about 15 percent of the US industry; they'll probably grow to at least 50 percent in the next decade. Their cost advantage over the Cartel/ Network carriers is simply too great, their product quality is very good, and their managements have learned from the mistakes of failed low-fare carriers like People Express.

By the end of the decade, I'd imagine that every medium-size or larger US airport, and selected smaller airports, will have at least one of the major low-fare carriers. These airlines will continually refine their FF programs to be more attractive to business travelers. Southwest's seems to work well, from what I read.

Also, these carriers are opening more and more quality hub facilities--like the new WN facility going up at BWI, and the new terminal at MDW. These won't be the last major low-fare terminal complexes to be built. Especially on WN, though, enough flights will continue to be point-to-point that we won't see anything like a low-fare O'Hare.

The Cartel Carriers will probably be a smaller version of their current selves, and their regionals will be larger. There will always be people who want first class, and people who want to fly directly into Roanoke, Binghamton, Springfield IL, or Fargo. The Cartel/ Network carriers will continue, I think, to be the sole providers of scheduled transoceanic service. That's not feasible on the cost structure of low-fare carriers.

There will be five or fewer Cartel/ Network carriers by the end of the decade; US Airways will be gone and possibly United. Regional a/c will fly all a/c up to 100-115 115 seats, because Embraer, Fairchild etc. will have the cost advantage on a/c up to that size. Whether mainline pilots or regional-carrier pilots fly these planes remains to be seen.

Jim




Need a new airline paint scheme? Better call Saul! (Bass that is)
User currently offlineUALPHLCS From , joined Dec 1969, posts, RR:
Reply 3, posted (12 years 9 months 2 weeks 5 hours ago) and read 2825 times:

While I agree w/ most of your post DCA-ROC guy, your assesment that UA will possibly be gone is so stupid I won't comment any further on it.

The majors will always be around because they are the only ones that can offer service from DSM to BKK for example. The idea is that the more passengers one has to split the cost of operating an a/c the more money you make. Fractional bizjets will lower the cost of corpoate jets somewhat but those planes will always be prohibitivally expensive because they are small. Its Economics, plain and simple. The cost of operating a small bizjet will never be within the reach of the general flying public. No CEO is going to send an engineer to LHR from DSM in the Corporate jet just because he can. If a carrier has scheduled service and can get there in time the engineer will travel on a carrier.
the benefits of a bizjet are time and convinience. If you have the time and want to go when scheduled, you pay the cheaper rate. If time is of the essence to pay the premium rate of a bizjet.


User currently offlineElwood64151 From United States of America, joined Feb 2002, 2477 posts, RR: 6
Reply 4, posted (12 years 9 months 2 weeks ago) and read 2793 times:

As for the possibility of UA going defunct, who would have thought Eastern, Pan Am and TWA would now be gone back in 1980? Granted they may have been in trouble at times and some may have said that they needed to change or die, but so was the case at American at the time, and Continental. Why didn't they drop off? Who would have predicted in 1980 that little Southwest would be as large as it is now? Who would have predicted in 1995 that ValuJet would get back in the air (albiet under a new name) and be the fastest growing airline in the US in 2001?

As in any industry, and in fact, especially in the airline industry, things change. Airlines go belly up. New airlines start up. Airlines merge. Accidents happen. Terrorists attack. Anything is possible.

We are dealing with the basic economic principle of supply and demand. If there is too much supply, no one makes money. Supply must be cut down, either by cutbacks at the suppliers, or by one of the suppliers going out of business.



Those who fail to learn history are doomed to repeat it in summer school.
User currently offlineDonder10 From Canada, joined Oct 2001, 6660 posts, RR: 21
Reply 5, posted (12 years 9 months 2 weeks ago) and read 2789 times:

I was thinking about the effect biz jets have on yield just yesterday!Altough comapnies with biz jets are in the minority,it is a growing minority!

User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4514 posts, RR: 34
Reply 6, posted (12 years 9 months 2 weeks ago) and read 2779 times:

Paste: While I agree w/ most of your post DCA-ROC guy, your assesment that UA will possibly be gone is so stupid I won't comment any further on it.

Jim: If I drew my paycheck from UA like you do, I probably might not enjoy that topic either. UA is hemmhoraging money like a sieve, and the IAM settlement is only the beginning of a *long* road back to a decent management-labor relationship. You probably are well aware of that. Also, UA's costs are high and most of Goodwin's lieutenants are still in place under Creighton. UA is *far* from out of the woods.

As Elwood said, no one would have thought 20 years ago that Eastern, Pan Am, and Braniff would be gone. UA may be far from "perishing," but they'll need to show some financial improvement in the next six months, before I for one will have confidence in their long-term survival.

Jim



Need a new airline paint scheme? Better call Saul! (Bass that is)
User currently offlineScottb From United States of America, joined Jul 2000, 6808 posts, RR: 32
Reply 7, posted (12 years 9 months 1 week 6 days 23 hours ago) and read 2772 times:

One point about business jets -- they do set a maximum price that an airline can charge for premium seats. After all, while a company might not send the business jet from DSM to LHR for a single engineer, they might send the jet from DSM to CDG for 3 or 4 sales reps, since the cost of four business class tickets to Europe isn't trivial either.

I don't see low-fare carriers being at quite 50% of the industry's capacity in 10 years, though I do see them having 25-30% of the market. I don't think they can quite maintain the level of growth to more than double their share of the market in 10 years. Consider that Southwest would need to add 60-70 jets per year to maintain a 10% growth rate at double their current size. 50% of the domestic market is plausible in about 20 years.

I do see consolidation among the major network carriers continuing, and I think that US Airways is the most likely to either fail or be bought. United has a tough road ahead of it if it can't fix its labor-management and cost problems. And I still don't see how America West survives in the long term, once the loan guarantees end.

There will, of course, still be a place for the network carriers to fly those passengers who are willing to pay a premium to travel "from anywhere to everywhere." They will probably be similar in size to what we see today, though there will be fewer of them. Most turboprop service will have been phased out, except for EAS markets. Many small-to-medium-sized airports which had mainline service in the past will see mostly regional jets, though they will see more flights from more carriers trying to compete for passengers. We'll also see an increasing number of airports dominated by low-fare carriers, with network carriers scaling back service or downgrading to RJ's. Certain congested/hub/slot-controlled airports will remain high-fare havens, though.


User currently offlineSrbmod From , joined Dec 1969, posts, RR:
Reply 8, posted (12 years 9 months 1 week 6 days 23 hours ago) and read 2769 times:

The fractional programs will get some of the business traveller because some companies will find that it can be financially a win-win situation. You can avoid the long check-in times, no worry about having to connect at hub cities, and with the improvements in satellite technology, you can get business done while in flight. And add to this the fact that most biz jets can land at smaller airports on the outskirts of towns and away from the bigger airports saves time as well. Smaller companies may not be able to afford this type of travel, but if several go in together, you may find more smaller companies buying into fractional programs and chartering of biz jets. The major airlines themselves will undergo changes as well. As long as their hub airports remain clogged, you will see the return of more point to point flight that avoid the hubs. Some airlines will unclog their own hub problems by transfering thin routes to their regional carriers. Scope clauses will affect the airlines, and you may see the future RJs (over 70 seats) in the stables of the major airlines on many routes. The smaller carriers will grow as well based on the downgrading of routes and cities by the major airlines. A good example of this right now is at BWI. Many cities that 5 years ago saw mainline service now see regional carriers handling those routes. In a way, the majors are repeating what they did in the late 70s early 80s after they were deregulated. They abandoned smaller cities that were unprofitable, and the regional airlines that sprang up took over those cities. And this is happening again. Some of the start-up carriers of the 1990s will start having agreements with regional feeders as well. Midway was the first to do so, and Frontier has started to do so as well. It's only a matter of time that we will see a carriers for AirTran, Vanguard, and even JetBlue. As for the demise of any of the majors, the two that seem most likely headed to demise are U.S. Airways and America West. What would make sense would be for someone to buy the two airlines, sell off parts of it (gates, routes, aircraft, etc.) to build a stronger airline that could compete in the marketplace. Some of the majors may well end up filing for CH. 11, but they will survive. The industry is going to become more niche-like, with certain airlines filling certain roles.

User currently offlineIAHERJ From United States of America, joined Jun 2001, 677 posts, RR: 7
Reply 9, posted (12 years 9 months 1 week 6 days 22 hours ago) and read 2751 times:

Very interesting reading here. I just put down my February copy of Aviation International News. There is an interesting piece which discusses major corporations use of corporate shuttles. I see the independent regional carriers diversifying in the upcomming years and offering 50 passanger shuttles for major corporations between high density city pairs for that individual corporation. This will put some pressure on the fractionals while keeping the airlines hand in the high yield business passanger game.

One thing is for sure, the big 6 are going to have to adapt to the new environment. They have in the past and I'm sure they will in the future. Consolidation in some form will probably be a byproduct of this adaptation. I see the hub system remaining in place but with a second teir scheduling system in place that offers point to point regional jet flights in a lower cost environment being made available. Brand loyalty will become ever so important as the RJ has eliminated any single carriers dominance nation-wide. Airlines are going to have to compete in onboard service and reliability for a change, not price alone. The consumer wins hands down in the next 5 years and the airline with the most sound business plan and innovative management team wins as well.

One thing is for sure, we live in interesting times!

IAHERJ



Actually flown: EMB-120 EMB-145 B717 B737 B757 B767
User currently offlineUal777contrail From , joined Dec 1969, posts, RR:
Reply 10, posted (12 years 9 months 1 week 6 days 21 hours ago) and read 2743 times:

i feel that airlines do come and go, some will be here for a very long time. i feel united will be here a great deal longer than some of the other big ones.united has management problems but what airline doesnt? some you never hear of, and i know southwest is a great airline.southwest could never do what united, american, delta and so on do.they would be just like everyone else.united will settle it's labor problems and get rid of rono dutta, and return to the skies once more stronger and better.

User currently offlineDesertJets From United States of America, joined Feb 2000, 7802 posts, RR: 16
Reply 11, posted (12 years 9 months 1 week 6 days 21 hours ago) and read 2733 times:

Contraction and expansion... seems to be the order of the day.

With the most recent bout of low-fare start ups since the mid-90s, I feel that they are here to stay and will become major players. Southwest along with Frontier, Jetblue and Airtran will begin to carve out bigger and bigger niches. I somehow doubt in ten years that all of the majors will be as big as they are. United and well as USAirways may well be forced to contract their sizes even further to stop bleeding money. I think this trend will also be true among the large international carriers too.



Stop drop and roll will not save you in hell. --- seen on a church marque in rural Virginia
User currently offlineUALPHLCS From , joined Dec 1969, posts, RR:
Reply 12, posted (12 years 9 months 1 week 6 days 18 hours ago) and read 2719 times:

I will be concerend w/ the low-fare carriers when they start to offer Long range intl flights. When jet blue can connect me from ROC-NRT, for a fraction of UA or AA fare, I'll go looking for a job with them.
WN and Jetblue have their niche, and the big carriers will adapt. But customers have a way of demanding low fares for 6-10 years then demanding global reach from their home, for a time. Thats the industry buisness cycle.
Corporate jets will never replace hub and spoke carriers. The economics of travel will not support mass travel on corporate jets. Noone will make money.
As for RJ's as part of a carriers fleet that will be inevitable. Passengers demand service from thier home airports connecting to the world. the only way to do this economicly is RJ's to hubs.


User currently offlineUal777contrail From , joined Dec 1969, posts, RR:
Reply 13, posted (12 years 9 months 1 week 6 days 18 hours ago) and read 2713 times:

I disagree with some of the comments said, and agree. As far as frontier and southwest ever going international? that will never happen, then they wouldnt be a low fare carrier. you cant fly from ORD-LHR or to any other point with out a wide-body.or in some cases a 757 like continetal has proven that can be done( EWR-DUB) then you've got meals and paying pilots more money, so many more costs that would make a low fare carrier to not go international.if any of the low-fare carriers ever go international it will be frontier,but they wont.only my opionion.

User currently offlineN757st From United States of America, joined Feb 2002, 384 posts, RR: 0
Reply 14, posted (12 years 9 months 1 week 6 days 17 hours ago) and read 2701 times:

AS for southwest, jet Blue, air tran and the others carving up 50% of the market, I believe this will never happen. Much of the airline's money come from buisness travelers, and buisness travelers do not like to fly low cost carriers(at least from what I have seen). I know that from BDL on southwest you will often have to make 2 connections to get to many destinations, and this is really not acceptable to a buisness traveler.

Well, I will possibly be flamed for this, but I really see a limit to these budget carriers as a mode of travel catering mostly to the leisure travelers of this country. Many buisness travelers like to book through a travel agent, like the added legroom of american, the connectivity of delta connection, the modern fleet of continental, and the many northern reaches of northwest. Southwest has its place, and is currently thriving, but they do not cater to the buisness world.


User currently offlineA/c dxer From United States of America, joined Aug 2001, 416 posts, RR: 0
Reply 15, posted (12 years 9 months 1 week 6 days 17 hours ago) and read 2688 times:

I thought I heard Southwest was going to 757's if thats true then they can go international.

User currently offlineN757st From United States of America, joined Feb 2002, 384 posts, RR: 0
Reply 16, posted (12 years 9 months 1 week 6 days 17 hours ago) and read 2687 times:

"I thought I heard Southwest was going to 757's if thats true then they can go international."

I kind of doubt that in a big way.


User currently offlineA/c dxer From United States of America, joined Aug 2001, 416 posts, RR: 0
Reply 17, posted (12 years 9 months 1 week 6 days 16 hours ago) and read 2681 times:

why is that?

User currently offlineUal777contrail From , joined Dec 1969, posts, RR:
Reply 18, posted (12 years 9 months 1 week 6 days 16 hours ago) and read 2679 times:

i didnt hear about the 757's.what route would they do? they couldnt get into LHR. they would probably be an america west getting 2 747's to hawaii.it wont last long.they arent that kind of an airline,if they started going international they would lose that nitche they have now.

User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4514 posts, RR: 34
Reply 19, posted (12 years 9 months 1 week 6 days 13 hours ago) and read 2660 times:

N757ST: Well, I will possibly be flamed for this, but I really see a limit to these budget carriers as a mode of travel catering mostly to the leisure travelers of this country. Many buisness travelers like to book through a travel agent, like the added legroom of american, the connectivity of delta connection, the modern fleet of continental, and the many northern reaches of northwest. Southwest has its place, and is currently thriving, but they do not cater to the buisness world.

Jim: As far as I can tell, disagreeing with someone isn't of itself flaming them. Business travelers, I think, especially at the increasing number of small businesses in the US, will become more amenable to low-fare carriers over the next decades. Low-fare carriers are going to the JetBlue "quality/ value" mode--nice seats, more room (JetBlue seats 162 in an A320 that could seat 186 in its 3 x 3 configuration--sounds like more room throughout coach to me). As they get larger, their destination reach will become better, and their FF programs more valuable.

And during softer economic times, large corporations can demand that their employees use low-fare carriers where available. AirTran was lured to Rochester recently by the promise of several large companies to use them. The Rochester paper reports that JetBlue flights to JFK are heavy with business travelers.

(Regarding FF miles, a large company could solve that problem very easily. The company itself could become the FF program--all miles earned by employees on any airline go to the company, who disburses them back to employees on any carrier for which the airline has miles. So all those employees who want to use FF miles to go to Europe can withdraw AA miles and head for LHR. And employees who want to use FF miles to take the kids to see Mickey Mouse can withdraw FL miles, etc.)

The Cartel carriers will always provide certain things have that low-fares cannot, of course. 1) much more thorough network reach including small cities; 2) international flights; and 3) premium services such as high-end first class, and international alliances that offer vast FF-miles reach. As I said above, the Cartel carriers will always have a substantial and irreplaceable place in the picture. How anyone got a different impression from my words, I don't know.

Jim



Need a new airline paint scheme? Better call Saul! (Bass that is)
User currently offlineB744F From Germany, joined Jan 2006, 0 posts, RR: 0
Reply 20, posted (12 years 9 months 1 week 6 days 11 hours ago) and read 2663 times:

There is no way biz-jets can takeover scheduled longhaul services. The most expensive first-class return ticket from Europe to anywhere costs not more than USD 10k. BA wants USD 9k for roundtrip LHR-SYD in first. The same trip on GIV/GV will cost well over USD 200k, you can not justify this cost even at full GV payload. What's for travelling of 1-2 persons then?
The break-even type, where you can see almost no difference between chartered vip-jet and first class tickets - is BBJ in tight config (40+ pax), but only for cases when it carries full payload. How often any company needs 40+ people to travel together?
Clearly, longhaul biz-jets will stay a kind of luxury thing for very rich and famous (who already using them). There are no economical reasons for companies to choose biz-jets. However, small biz-jets could be a good deal for short multi-leg trips.


User currently offlineUALPHLCS From , joined Dec 1969, posts, RR:
Reply 21, posted (12 years 9 months 1 week 6 days 5 hours ago) and read 2633 times:

Thank you B744F for supplying the numbers that proved what I knew in my gut. The original post wanted to know if corporations would turn away from the big carriers to bizjets. The answer is simply no way. The cost of bizjet travel may lower in the future but never to the point where it will be economical to move large amounts of people.
Large corporations have hundreds of employees travelling per day. Small corporations will never be able to afford a corporate jet. The only time a small corporation will use a bizjet is when the CEO and CFO go on a roadshow for an IPO. Then the IPO manageing bank usually picks up the tab.


User currently offline777d From United States of America, joined Jun 2001, 300 posts, RR: 1
Reply 22, posted (12 years 9 months 1 week 6 days 4 hours ago) and read 2628 times:

I believe the airlines industry is at a crossroads. With the economic downturn and subsequent recovery the paying passenger is going to be more savy in there selection of carriers. Majority of us here would like to fly Virgin, Singapore, Cathay, British and throw in a US carrier in there of your choice.

I believe in the US, the majors will have international flying but from only from a major hub or region. For example lets look at UAL. With flights to NRT from SEA, SFO and LAX I believe they will move them to one origin and code share from the other origin cities. From ORD they will continue to fly and from JFK as well. The majors will take advantage of their alliances they are involved in at this moment and perhaps expand them even further. UAL needs to reduce costs immediately perhaps they will look at this as a way to stem the red ink. AMR, DAL and CO will probably try this as well. The reduction of purchasing new aircraft will limit the obvious, expansion. Code-sharing from the USA to international destinations will increase and code share into the USA will increase even further.

Expansion through your partners is the best way to reduce cost and yet increase your reach and marketability.

Just my two cents…..


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