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If oil stays at $75, or goes higher, we can expect some very fast moves by the airline industry:
Fares: No More Testing The Waters. Whether it's via a $20 fuel surcharge, an across-the-board fare hike, a juggling of fare buckets, or a combination of the above, air fares will be jacked up materially.
Traffic: Strong Economy Or Not, It'll Head Down. Keep in mind that as airlines find it imperative to raise fares, gasoline prices will go up, too. That means less disposable income to take the kids on a vacation to see grandma. Less in the travel budget at businesses. So, demand will drop - albeit unevenly by region and by market - and carriers will find it necessary to slash capacity. That's hard to do when you've got a bunch of new airplanes on hard order. Easier to do when you have a static fleet, and the ability to park some birds in the sun.
Fleets: Call Your Realtor At Coolidge, AZ. Desert space will be at a premium for airplane parking, as carriers cut back capacity. Carriers in the best shape, at least fleet-wise: Northwest, with a flock of DC-9s that can be easily parked and have little or no debt service. American: a large fleet of MD-80s that can be parked, aircraft rental costs notwithstanding. Delta: it has plenty of excess RJ lift that can come out, and, possibly, dumped under Chapter 11. Airlines in more difficult shape: those that a) have lots of new airplanes on order, and b) are focused on a plan that's predicated on domestic traffic growth to carry the day. Draw your own conclusions regarding who's who.
Labor: Already Pretty Much Bled Dry. Unlike in the past, labor cuts are not going to be in the cards, except possibly at Southwest, and - as if it matters - at some "incremental lift re-sellers," a.k.a, small jet providers, a.k.a. regional airlines. This latter segment will be hit very hard, as the ability to generate sufficient revenues with high-cost 50-seaters will be even more dicey.
Rural Air Service: The Bar Is Going Up. The costs to access the incremental revenues at smaller airports are going to go up astronomically. That means that the ability of some communities to continue to support air service will be torpedoed
Wow! Well there ya have it folks! We got it all figured out!Originally Posted by RockBottom
from Michael Boyd:If oil stays at $75, or goes higher, we can expect some very fast moves by the airline industry:
Fares: No More Testing The Waters. Whether it's via a $20 fuel surcharge, an across-the-board fare hike, a juggling of fare buckets, or a combination of the above, air fares will be jacked up materially.
Traffic: Strong Economy Or Not, It'll Head Down. Keep in mind that as airlines find it imperative to raise fares, gasoline prices will go up, too. That means less disposable income to take the kids on a vacation to see grandma. Less in the travel budget at businesses. So, demand will drop - albeit unevenly by region and by market - and carriers will find it necessary to slash capacity. That's hard to do when you've got a bunch of new airplanes on hard order. Easier to do when you have a static fleet, and the ability to park some birds in the sun.
Fleets: Call Your Realtor At Coolidge, AZ. Desert space will be at a premium for airplane parking, as carriers cut back capacity. Carriers in the best shape, at least fleet-wise: Northwest, with a flock of DC-9s that can be easily parked and have little or no debt service. American: a large fleet of MD-80s that can be parked, aircraft rental costs notwithstanding. Delta: it has plenty of excess RJ lift that can come out, and, possibly, dumped under Chapter 11. Airlines in more difficult shape: those that a) have lots of new airplanes on order, and b) are focused on a plan that's predicated on domestic traffic growth to carry the day. Draw your own conclusions regarding who's who.
Labor: Already Pretty Much Bled Dry. Unlike in the past, labor cuts are not going to be in the cards, except possibly at Southwest, and - as if it matters - at some "incremental lift re-sellers," a.k.a, small jet providers, a.k.a. regional airlines. This latter segment will be hit very hard, as the ability to generate sufficient revenues with high-cost 50-seaters will be even more dicey.
Rural Air Service: The Bar Is Going Up. The costs to access the incremental revenues at smaller airports are going to go up astronomically. That means that the ability of some communities to continue to support air service will be torpedoed