jlbmedia
Posts: 295
Joined: Mon Jun 03, 2002 11:29 am

Airlines Cutting Routes Due To Fuel Prices?

Wed Dec 12, 2007 4:34 am

Ok, just for the fun of it, lets "pretend" that I am an idiot. Try to explain the difference to me between these two examples.

1) An airline announces that it is canceling a route because it is not making any money.
2) An airline announces that it is canceling a route because of the cost of fuel.

The # 2 reason seams to appear as the cause much more often than # 1. Are they saying essentially the same thing in both examples, but # 2 diverts blame to the oil cos. instead of the airline! I would find it hard to believe even if the route is still making a profit, the route would be cancelled do to high fuel costs. But as we all know this is the commercial airline business!

Ok. just for the fun of it. lets "pretend" that I'm not an idiot any more!  Wink John.
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futurecaptain
Posts: 1918
Joined: Sat Sep 09, 2006 1:54 am

RE: Airlines Cutting Routes Due To Fuel Prices?

Wed Dec 12, 2007 4:50 am



Quoting Jlbmedia (Thread starter):
Try to explain the difference to me between these two examples.

They do seem to say the smae thing. I only have one explanation.

The route being cut was always a loss making route but the feed off of the route filled other planes making them more profitable. So, the airline eats a small loss on a short route to make a longer route more profitable by filling the plane with feed from the loss route.
Now, with fuel rising the loss making route is now losing more money, so much that the additional feed is no longer worth it.
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masseybrown
Posts: 4410
Joined: Wed Dec 11, 2002 2:40 pm

RE: Airlines Cutting Routes Due To Fuel Prices?

Wed Dec 12, 2007 6:55 am

Lately, both DL and WN have reported soft bookings. So fuel isn't the only factor. Additional increases in fares to cover the fuel cost may only lead to more traffic declines. Ugly winter coming, it seems.
 
MAH4546
Posts: 24522
Joined: Wed Jan 24, 2001 1:44 pm

RE: Airlines Cutting Routes Due To Fuel Prices?

Wed Dec 12, 2007 7:10 am

Quoting Jlbmedia (Thread starter):
The # 2 reason seams to appear as the cause much more often than # 1. Are they saying essentially the same thing in both examples, but # 2 diverts blame to the oil cos. instead of the airline! I would find it hard to believe even if the route is still making a profit, the route would be cancelled do to high fuel costs. But as we all know this is the commercial airline business!

It shouldn't be that hard to believe. Sometimes, increases in fuel prices can't be made up for in increased ticket prices. Some rights might be marginally profitable, but a $30 rise in fuel costs can easily make the flight unprofitable. This is especially true in price inelastic markets, like Las Vegas and Orlando. And look at many of the routes being cut lately, and they are either vacation routes or long and thin RJ routes (i.e. Las Vegas-Atlantic City on Spirit; Orlando-Amsterdam on Martinair; Atlanta-McAllen on Delta), which tend to be more price inelastic (the former because vacation travelers have no problem pay less for a connection; the latter because thin/long RJ routes tend to have lower load factors and fares that are already high, and can't go much higher and they can't stimulate much demand from new customers as there aren't many to begin with).

Cutting routes because of fuel prices isn't an excuse. It's happening. Routes are becoming no longer profitable because of it.

[Edited 2007-12-11 23:12:20]
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