boeing 747-311
Posts: 777
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How Does War Exactly Affect Airlines

Wed Feb 05, 2003 1:21 pm

How is a long war, harmful to airlines. Everyone says a long war would knock UAL out of business, how exactly does that happen? why is war so bad for airlines? im sorry if this has been discussed before!
thanks


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HlywdCatft
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RE: How Does War Exactly Affect Airlines

Wed Feb 05, 2003 1:27 pm

People are afraid to fly because of terrorist retaliation. Fuel prices go up making tickets more expensive.

Pan Am and Eastern went belly up after Desert Storm, there's an example of two majors there.
 
boeing 747-311
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RE: How Does War Exactly Affect Airlines

Wed Feb 05, 2003 1:29 pm

So most of them go out of business, because of high fuel prices?
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artsyman
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RE: How Does War Exactly Affect Airlines

Wed Feb 05, 2003 1:37 pm

People dont fly, therefore people are not paying for tickets, therefore airlines have less money to pay for things, yet still have to pay virtually all their costs as airlines in general have really high fixed costs. With the memory of Sept 11th still fresh, I know that many yanks will not be flying.

AA for example are losing around 5 million per day at the moment, if a war happens, that will drop to probably 10 million or who knows what, at that cash burn, it isnt hard to see how they will run out of cash reserves quickly.
 
MCOtoATL
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It Speeds Up The Inevitable

Wed Feb 05, 2003 2:16 pm

Granted, some airlines that will suffer will be true victims of the potential war, but the others are suffering long before a war would start. War would act as the final nail in the coffin, but to blame the war for an airlines demise is rather shortsighted.

Pan Am and Eastern had the proverbial one foot in the grave prior to the Gulf War. Granted, the war did not help them, but without the war, the fates of those two once-proud carriers would have been the same.

Currently, it is reported that AA is losing $5 per day, and their recent cost-cutting measures have not had any major impact (according to an article I read.) If fewer people fly, revenue goes way down, fuel prices will increase, thus costs skyrocket, and AA is in trouble. But again, they are in trouble now.

In the event of war, the airlines will suffer, as will many other businesses, not to mention the human loss of life and families separated from loved ones. The toll will be terrible. But for the airlines, things were terrible long before 2003.
 
swissgabe
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RE: How Does War Exactly Affect Airlines

Wed Feb 05, 2003 6:35 pm

Higher fuel prices = higher costs
less passenger = less revenue

Especially European carriers to Asia and Asian carriers to Europe would have also to divert flights in case of a war which might take an additional 45 - 75 min. flight and of course higher costs as well. There might even be an additional stop involved.

Especially carriers with high debts and loss making carriers will face big problems.
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boeing 747-311
Posts: 777
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RE: How Does War Exactly Affect Airlines

Thu Feb 06, 2003 8:28 am

Why wouldnt people fly though? i dont understand why people wouldnt fly just because of a war going on. i flew just weeks after sept 11, and i was afraid of flying. is that the reason people wouldnt fly, becuase they are afriad?
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cloudy
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RE: How Does War Exactly Affect Airlines

Thu Feb 06, 2003 8:35 am

Boeing 747-311,

Thats because you think rationally. Don't expect the same from the general public. Even the Columbia disaster may have an impact - it gets people thinkin' about crashes and that may scare some. It won't scare em' allot - but it may have just enough impact to prevent some people from flying.

However, I do have some hopes that the public may not think/feel this way about a short war. 9/11 had a big impact, the Afghan war apparantly didn't.
 
boeing 747-311
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RE: How Does War Exactly Affect Airlines

Thu Feb 06, 2003 8:40 am

Cloudy-
i understand you now, as i fly about 30 times a year, and as i think about it now, maybe people who fly like 3 times a year may think twice about flying. thanks a lot!! sorry about that
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AA737-823
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RE: How Does War Exactly Affect Airlines

Thu Feb 06, 2003 9:41 am

I would like to question the "that's because you think rationally statement."

While it is very important to think both rationally AND responsibly, I think that responsible thinking may cause a person to question flying.

Let's look at it. Would you agree that terrorism is more likely DURING a war time? I think so. If you don't agree, then you won't agree with my point. That's cool. But- I think that bombings, hijackings, et cetera are more likely if we declare war. Therefore, I myself- through rational thinking- might be less likely to fly. Now, we all know that I am a flying lunatic, and would jump at the next chance to fly, but were I John Q Public, that would not be the case. Why not take the train? The Bus? Your Auto? Yes, there are HUGE reasons not to take any of those modes of transport, but, point number two, they are all cheaper. War time means economy goes down. I am less likely to spend my money in war time than in happy- go lucky peace time.

SO- you end up with:
1. People that are afraid of flying
2. People that are afraid to spend money.

I think that spell fewer fliers.

I am interested in your replies, Boeing 747-311 and Cloudy. What do you think? Give us a holler.

Randy
 
Leezyjet
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RE: How Does War Exactly Affect Airlines

Thu Feb 06, 2003 11:20 am

People who don't fly much $h!t themselves and think that they will get blown up if they fly during a war !!. Yer right O, that's 1000's of miles away from where most of them would be flying.  Nuts

There is also the fact that people like to stay home where they feel safe in familier surroundings incase the situation escalates into something much more serious like a nuclear war, and they would also be close to their loved one's rather than being away in a strange place.

It's great for staff travel though Big grin

 Smile

"She Rolls, 45 knots, 90, 135, nose comes up to 20 degrees, she's airborne - She flies, Concorde Flies"
 
boeing 747-311
Posts: 777
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RE: How Does War Exactly Affect Airlines

Thu Feb 06, 2003 12:43 pm

AA737-823-

I agree and disagree, i would have thought that there were more chances of hijackings and etc.. would be more likely when we started to take on afhghanistan and al qaeda. They are the worst terror group in the wolrd, so i would have expected them to be the ones hijacking planes and things like that. but i agree with the rest of ur points!!

have a good day.
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Staggerwing
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RE: How Does War Exactly Affect Airlines

Thu Feb 06, 2003 4:00 pm

I was listening to NPR's special coverage of Colin Powell's speech to the UN Security Council on the way into work on Wednesday afternoon, and an airline consultant (I can't remember his name) was asked what effect would war have on the airlines. He said that if we go to war in Iraq this year that he expects all major United States air carriers to be in bankruptcy. One of the things he mentioned is that he thought pay scales would be further scaled back, and that at the end of it all, pilots would be making about half of what they had made before 9/11.

I generally think that we need to get rid of Saddam Hussein, but at this time I don't feel that he is enough of a threat to justify the economic damage that may occur to our economy in order to do the job.
 
air2gxs
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RE: How Does War Exactly Affect Airlines

Thu Feb 06, 2003 7:45 pm

Don't forget CRAF. Most, if not all, airlines get a govt subsidy to be in the CRAF program. When the govt activates CRAF airliners, both pax & freighters get taken into govt service. This pulls them off revenue making trips and puts a strain on the airlines' spare system. Lots of money hemorrhaging in that case.

But, I also believe its the psychological impact. People will not spend money during a long war because of the uncertain future. Air travel is a luxury, therefore, people will not partake of it.
 
MCOtoATL
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RE: How Does War Exactly Affect Airlines

Fri Feb 07, 2003 1:45 am

Obviously, the airlines want you to believe that a war would be devastating to the airlines. But I find it hard to believe that every major carrier would succumb to bankruptcy. While higher fuel costs and potentially lower loads would affect some carriers, I wonder how much Airtran and Frontier and Southwest would be affected. While they would see traffic decrease, would it be enough to cripple the airline? Hard to say, but I doubt it (but then again, I have been wrong before.) While international traffic would plummet, I don't see how a war in Iraq would affect the Nashville to Denver route (for example.)

As for pilot's pay, it will be interesting to see the longterm affect. In a free-market system, the law of supply and demand is at work. If airlines cannot compete with higher salaries, they would have to come down. While this may not seem to be fair, it's what each industry deals with. A professional athlete is in no way deserving of more money than a police officer, teacher, or fire-fighter. But that's what the market allows.
 
Ex_SQer
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RE: How Does War Exactly Affect Airlines

Fri Feb 07, 2003 9:32 am

Think in terms of this simple formula:

Profit equals Revenues minus Costs

During a war, revenues shrink, costs go up.

Why does revenue shrink? People are afraid to fly. Also, whenever war breaks out people feel a certain level of uncertainty and insecurity, and they tend to tighten their belts and purchase more necessities and less luxuries (and when you consider the current economic climate, it becomes a double whammy). Firms will cut spending, which means less seats purchased and less cargo transported. Faced with such a situation, airlines will drop fares to entice people to fly. While this may drive ticket sales, it then becomes a balancing act - if they drop prices too much and their sales volumes do not experience a significant increase, then this will represent a net decrease in revenue.....


Why do costs go up? Fuel prices will rise. Some airlines would have hedged their fuel, but no airline hedges 100% of their fuel costs. Insurance rates will go up, especially on flights that operate to airports near the war regions. Airlines that fly over trouble regions will have to divert or fly around them, leading to yet more costs. Airlines also have very high fixed costs, and it is very hard to cut down quickly.

So yes, war affects airlines adversely. Different airlines will be affected in different ways, but few, if any, are immune.
 
cloudy
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RE: How Does War Exactly Affect Airlines

Fri Feb 07, 2003 10:59 am

Being afraid of flying because of fear of war is irrational because it is irrational to act for the purpose of avoiding an insignificant risk.

If you want to see my arguments for the first statement above, look up what I have said regarding ETOPS, etc. I will repeat those arguments if neccesary.

I define an insignificant risk as a risk that is considerably less than the chances we take in everyday life. And yes, by this definition, the risk from a terrorist attack on an airplane you are flying on is insignificant compared to the chances you take every day. Like the chance of getting a heat attack from a cheeseburger or having a car accident. Even considering 9-11. Especially considering that most 9-11 victims were "safely" on the ground.
Perhaps some of them thought about flying that day but were afraid to. It didn't exactly help them.

I was not refering to economic factors - Boeing 747-311 refered to fear and I was responding to that. Though the point about people wanting to be closer to home in troubled times is a good one. Though it is not a rational patern of thinking in this instance. Staying at home will not protect you from terrorism - and there is precious little that relatives+friends could do to save you even if you were close to home durring an attack.