Originally Posted by
Excargodog
I am not sure the conventional wisdom even applies any more. These ULCCs are growing 16-17% year over year. They have a young fleet of highly fuel efficient aircraft and a relatively young workforce which means their pilots are less costly even if they had the same payscales as the legacies - which they do not. It is an enormous advantage.
So which airlines are going to do better in the next recession - F9 and NK with their 4-5 year old A320 fleet or legacies like AA with their mixed aircraft fleet with an average age of 11 years (and a $23 Billion debt), United, and Delta both with 15 year old and less fuel efficient fleets? It might well be the ULCCs.
At least in Delta’s case, there is an enormous hedge built-in against a downturn - owned jets. With fuel prices low, economy strong, and MAX stored - the old planes still make a lot of money. If the economy starts to sour, DL can essentially throttle the owned 88s/90s/717s/757s/767s, and basically ‘park to profitability’. I would suspect that most ULCCs have a majority of their fleet leased, and it’s not as cheap or easy to park/return to lessor. Now of course I hope that scenario doesn’t occur, but with the thousands of pilots retiring in next few years - it’s hard to see a substantial furlough occurring at the legacy level. I can’t say i’m as confident for the ULCCs.
Lastly, when the economy dips, discretionary spending is typically the first thing that gets pulled back. The family trip to Disney gets put on hold, but the business trip to LAX is still going. Legacy carriers pay the bills with business travelers who are typically less sensitive to market swings.