EAL757
Topic Author
Posts: 176
Joined: Mon Apr 12, 2004 9:58 pm

The Future Of The Airline Industry

Thu May 13, 2004 8:57 pm

Just some thoughts...most of the majors right now are blaming losses on gas price increases...or at least saying that's a good chunk of their losses. Well, this is the thought...OPEC is decreasing oil production and it doesn't look like relief is in sight. In fact, since America was paying a very low rate compared to the rest of the world, I think we're being cultured into accepting $1.75 as a national average as a darn good price. Well, since that kind of increase (what, about $.40 this year) affects the airline industry in a huge way...in other words, the millions or billions they budget for fuel was 25% under budget, and it's probably not going to change, and considering most of the majors are doing all the cost cutting they can do (of course, not DL though), then somethings got to break or we're going to see America without a few of the majors is a short time.

You can't keep operating with millions in losses and expect to stay afloat. Airlines are in the business to make money, and right now most aren't doing it.

So what is the solution? 1) You could say survival of the fittest, but let's say a couple of the majors go under...Continental would probably survive, but so what...they would benefit from pax increase, but Continental is keeping a pretty high passenger load already and not making money as it is...so survival of the fittest doesn't really solve. 2) a merger? What would have happened if US and UA had merged a few years ago...it would have been a nightmare--both would be out of luck. What if DL and NW merged right now--that wouldn't solve a darn thing...the pilots unions would just bicker about seniority and you'd just be compounding their respective problems...no solution there. 3) go low cost. Well, I think DL will never do that because it would mean their pilots made tons less...I can't really say AA, UA or NW pilots conceding that kind of money either, and it would take them each 10 years to get to a place with their lease and route agreements before they could even be consider LCC's. 4) some government help? Look at Amtrak--they haven't turned a profit once and I fear that given the economic conditions, most of the majors, even with govt. help would be the same kind of mind-blower that Amtrak is. Politicians are still trying to figure out why Amtrak can't make a dollar for Pete's sake.


So, think about it - what then is the future of the airline industry, because as is, only the LCC's and maybe Continental are surviving...and even Continental is still losing $$.

-Jeff
 
skymileman
Posts: 577
Joined: Sat Jul 21, 2001 2:32 am

RE: The Future Of The Airline Industry

Thu May 13, 2004 9:00 pm

I didn't completely read the above, but I know from the topic what I want to say about it. The airline industry goes through ups and downs all the time. Right now, I guess, they are in a REALLY BIG down, but I have the utmost confidence that there will be an up again.
 
EAL757
Topic Author
Posts: 176
Joined: Mon Apr 12, 2004 9:58 pm

RE: The Future Of The Airline Industry

Thu May 13, 2004 9:06 pm

Skymileman...I'd say the last major down time the airlines had was around 90-92. Well, the only LCC around at that point was Southwest...Frontier and ATA were I believe but hardly competitors. ...and even Southwest hadn't come into it's hey day yet. It was still doing midwest to west operations only. That meant the majors could charge more for tickets and make more per seat mile.

You say that the industry will return to it's greatness, but I say show me how! There's an influx of airlines--and more on the way (Virgin US) ...and the LCC's are growing fast (Jet Blue, Spirit, AirTran all have big orders)...so tell me how the majors are going to return to greatness?

-Jeff
 
mrniji
Posts: 5382
Joined: Sun Feb 29, 2004 11:51 am

RE: The Future Of The Airline Industry

Thu May 13, 2004 9:22 pm

- The future is strategic alliance building to reduce costs

- Then, many LCC in my eyes don't have any great future - they might grow fastbut if they don't start to make profits, it will have an end.

- Prices will augment since they are already (too) cheap

- many airlines need to rethink their strategies of unsustained growth. Some are doing a good job of growing slowly in the limits (Asians like AI, PK etc)

- Here we can see the problems or privatization, which everyone advocates so strongly - airlines have to rationalize, cut back unprofitable roots, which people were dependent on... of course I agree that privatization was necessary, but a 'mixed modell' (subsidies etc) could have ensured the industry to be more healthy

Peopl, everyone welcome to disagree with my provocative words, but please don't be too acrimoniously! These are only my opinions and input for discussion

"The earth provides enough resources for everyone's need, but not for some people's greed." (Gandhi)
 
EAL757
Topic Author
Posts: 176
Joined: Mon Apr 12, 2004 9:58 pm

RE: The Future Of The Airline Industry

Thu May 13, 2004 9:27 pm

Mrniji:

I agree with you on most of your points but let's talk about ticket prices...unfortunately, you'll always have a carrier willing to go lower on a particular ticket price/route. It's the game of competition...I wouldn't expect fares to get cheaper!

I think we've seen strategic alliances and what it isn't doing for carriers...all the majors have some kind of alliance and it's not helping them all that much. It's not just the US carriers that aren't making money - this is an international problem! However, the Asian carriers seem to be doing quite well - perhaps we need to discern their secrets!

-jeff
 
Alessandro
Posts: 4962
Joined: Wed Sep 12, 2001 3:13 am

RE: The Future Of The Airline Industry

Thu May 13, 2004 11:23 pm

I think combos is part of the secret, part passenger and part cargo. I think
cargo is going to beat passenger traffic as most profitable in the future...
From New Yorqatar to Califarbia...
 
EAL757
Topic Author
Posts: 176
Joined: Mon Apr 12, 2004 9:58 pm

RE: The Future Of The Airline Industry

Fri May 14, 2004 1:25 am

this is true, but are we talking competing with the maritime shipping industry or going head to head with UPS/FedEx business?

-Jeff
 
taca
Posts: 134
Joined: Mon Feb 11, 2013 7:50 pm

RE: The Future Of The Airline Industry

Fri May 14, 2004 3:21 am

Only alliances will save many airlines. If the war in Iraq continues, and the Venezuelan President Chavez honor his word of not selling petroleum to the U.S. but to China, the oil prices will continue rising.

Working together many airlines will survive the crisis. The future seems to be pretty bad!!!!!!!!!!!!
 
InnocuousFox
Posts: 2556
Joined: Sat Dec 06, 2003 1:30 am

RE: The Future Of The Airline Industry

Fri May 14, 2004 3:27 am

First of all, OPEC production isn't going to change the REAL problem with gas prices - that US refineries are already running at capacity. Unless/until we are allowed to build more here in the US, this is going to be a long-term problem. (Remember to smack your local environmentalist upside the head when you get a chance.)

Also, we already have a hefty discussion going on about this right now. I would hate to duplicate efforts.
Dave Mark - Intrinsic Algorithm - Reducing the world to mathematical equations!
 
EAL757
Topic Author
Posts: 176
Joined: Mon Apr 12, 2004 9:58 pm

RE: The Future Of The Airline Industry

Fri May 14, 2004 8:35 pm

InnocuousFox: went to the discussion you linked--it has absolutely nothing to do with this thread.

-Jeff
 
InnocuousFox
Posts: 2556
Joined: Sat Dec 06, 2003 1:30 am

RE: The Future Of The Airline Industry

Sat May 15, 2004 1:33 am

"it has absolutely nothing to do with this thread. "

Uh... cost cutting, labor expenses... saving the industry? Helooooo?
Dave Mark - Intrinsic Algorithm - Reducing the world to mathematical equations!

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