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Tinpusher007
12-04-2007, 07:03 AM
It appears that DL is taking some unfavorable but necessary steps to stem losses and deal with fuel costs. Comments?

Airline tightens belt to offset fuel prices

By RUSSELL GRANTHAM
The Atlanta Journal-Constitution

Published on: 12/04/07

Delta Air Lines plans some job cuts, a partial hiring freeze, fleet reductions and other steps to cut capacity in response to high fuel costs, the carrier's president said Tuesday.

Delta President Ed Bastian said the carrier has set a "$400 million productivity target" for next year to offset jet fuel costs that have soared in tandem with near-record crude oil prices, which reached almost $100 a barrel in recent weeks.

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"We are pulling down domestic supply considerably," Bastian said during a Web cast of an investors conference.

In updated guidance to investors, Bastian said Delta now expects its operating profit margins in the final three months of the year to be flat or down 2 percent as a result of high fuel prices. The carrier had earlier projected operating margins of 3 percent to 5 percent in the fourth quarter.

The revised estimate means Delta will likely report a loss in the fourth quarter.

This year, airlines had been rebounding after years of losses as Delta and other carriers emerged from bankruptcy reorganizations with much leaner operations.

But Bastian said Delta is once again taking cost-cutting measures such as freezing new hires in "non-public-facing" job categories and targeting some unspecified positions for cuts. It is also parking aircraft and reducing its marketing budget in the face of a steep rise in fuel costs, its largest expense.

Delta now expects its average fuel price in the final three months of the year to be $2.60 per gallon, about 13 percent higher than previous projections. Jet fuel is Delta's largest expense.

Bastian said the carrier plans to freeze staff jobs that don't deal directly with customers. He said Delta has also "targeted some job cuts" but didn't offer specifics.

He said Delta has returned seven leased mainline jets and six smaller regional jets to reduce flying in the United States, and will cut 45 more jets next year.

"We'll take further steps to reduce supply" if fuel prices don't "stabilize," he said.

The carrier has more than 400 mainline jets in its fleet.

The reductions in Delta's domestic flying continue a strategy the airline has relied on during much of its turnaround efforts, as the growing competition from discount carriers has made many U.S. routes unprofitable for big network carriers.

Bastian said Delta will continue growing its more profitable overseas flying next year, where it is better able to pass higher fuel costs on to customers.

"We'll be growing international in relatively unabated terms," he said.

Anticipating questions about the airline industry's sagging stock performance, Bastian "we're also looking at the consolidation question" and taking other steps to boost Delta's market value.

He repeated an earlier announcement that a committee of its directors is looking at options ranging from acquiring another carrier to remaining an independent airline.

He said Delta will also take steps to more clearly report the financial performance of some of its operations that provide services to outside businesses, such as the maintenance division, its Delta Air Elite business jet unit, and its Comair regional carrier, which has previously said it is considering selling.


JungleBus
12-04-2007, 07:39 AM
Hold on while I mosey over to flightinfo so the General can tell us all how this is a good thing & Delta can do no wrong... :D

Bucking Bar
12-04-2007, 07:54 AM
Delta had announced their revision of the plan for 2008 several weeks ago and the internal hiring freeze began in the Summer. I believe the most recent AE reflects these changes going forward.

The "news" here is that the 4th quarter is going to be flat, or unprofitable. The pilot hiring will have to continue to staff the international expansion and the advanced entitlement awards have not staffed the fall of 2008 jets yet.

Oil is continuing to drop despite OPEC's verbiage and Chavez's attempt to subvert Venezuela's Constitution and install himself as Supreme Leader for life failed.

Yes, it is bad news, but I'm not running for the exits yet. Far from it.


alvrb211
12-04-2007, 08:53 AM
There's an aweful lot of gas guzzling aircraft out there among the legacy carriers.

I'm thinking every carrier will want to see the back of their Mad Dogs and sooner than later. That's a lot of aircraft!

AL

asupilot
12-04-2007, 09:07 AM
I just don't understand airlines...if the cost to bring the product to market increases then the cost to consumers INCREASES! Everything else on the planet we consume behaves that way so why doesn't airfare? I travel every month on my own dime, and although price has increased, I never complain because it beats riding the bus/train. Am I the only person who views commercial air travel as a premium product? Flying vs. other forms of transportation is like a comparison between a BMW and a Nissan. Does the bus/train get the job done? I guess so. Does a Nissan get you to the same place a BMW does? I guess so. So why pay extra...? BECAUSE DRIVING TO THE AIRPORT IN MY BMW AND FLYING TO MY DESTINATION IS SIMPLY BETTER! And I pay for it...it's a premium product and service. Is this really so difficult? Airlines need to ditch the Wal-Mart factor. Anyone overnighted something recently on FedEx or UPS? You guessed it..the price has gone up!

molson247
12-04-2007, 09:26 AM
It's a catch 22 boss....You raise the ticket fares....you are going to scare away some of the vacation/fun flyers who don't need to go anywhere. This inturn lowers revenue coming in. With the middle class's disposable income dwindling, its a fine line between raising ticket prices and still having them afford to fly.

newKnow
12-04-2007, 09:28 AM
I just don't understand airlines...

Airlines are not to be understood, they are to be worked for. Airlines don't provide service for passengers, they provide fat paychecks and golden parachutes for executives......

Sad, but true. :(

joel payne
12-04-2007, 09:48 AM
Once read that "the business of an airline is not to serve the customer, but rather to drive the other airlines out of business." May you live in interesting times.

IXLR8
12-04-2007, 11:37 AM
Airlines need to ditch the Wal-Mart factor. Anyone overnighted something recently on FedEx or UPS? You guessed it..the price has gone up!
Need to ditch the LCC's then....

Laxrox43
12-04-2007, 12:02 PM
...and one of my buddies just started 75/76 school there last month...
:(

RockyBoy
12-04-2007, 12:11 PM
...and one of my buddies just started 75/76 school there last month...
:(

And he will probably be holding a line on the ER in six months and have over 600 newhires in 08 behind him due to the international growth. The domestic mainline cuts are a transfer of domestic aircraft to international routes which requires more pilots. The rest of the domestic cuts are RJ's. Delta is still gonna need lots of pilots in 08. The worst news for pilots here is the reduced margin which means 1.5% pay restoration instead of 6% in Jan.

seaav8tor
12-04-2007, 12:29 PM
Since deregulation a significant amount of air travel was built on an elastic demand curve. For every price level, including ZERO, there is a finite number of passengers that will show up to fly. Finally, after 30 years, for the first time I'm going to give airline management credit. They are getting on the same page to shrink supply. It has never worked before due to competitors adding supply. This time, for the first time, they are all saying it together, "Supply must come down". The wild card remains new entrants.


If they are successful,

- Yield will go up
- Ticket prices will go up
- Load on ATC and the nations infrastructure will go down
- Carbon outputs will go down
- Delays will go down
- Pilot shortage, real or imagined will go away
- Pilot jobs will go away

In its current form the industry is unsustainable. Capacity cuts are the answer. If you are in the left seat a third or more up the list where you want to be and your airline makes it, this could be good. For everyone else, not so good. :(

SJF15E
12-04-2007, 01:26 PM
This rather important statement from the article (among others) was left out of the original post for some reason:

"Even as it it's taking measures to trim overhead costs and reduce its domestic operations, Delta said it is still hiring pilots, ticket agents and other airport workers, and plans to boost international capacity by 15 percent next year."

You can read the article in its entirety here:

http://www.ajc.com/business/content/business/delta/stories/2007/12/04/delta_1204.html

As a DAL poolie awaiting a class date I was decidely less alarmed when I read the entire article, although still not completely comfortable....glad I joined the AF Reserves.



By the way Ed Bastian is not the CEO as posted in the title to the thread, Richard Anderson is. Bastian is the President and the CFO (or the number 2 man).

JiffyLube
12-04-2007, 08:01 PM
The worst news for pilots here is the reduced margin which means 1.5% pay restoration instead of 6% in Jan.

Explain what you're talking about for those of us that don't know what you're talking about?!?

jsled
12-04-2007, 08:15 PM
Since deregulation a significant amount of air travel was built on an elastic demand curve. For every price level, including ZERO, there is a finite number of passengers that will show up to fly. Finally, after 30 years, for the first time I'm going to give airline management credit. They are getting on the same page to shrink supply. It has never worked before due to competitors adding supply. This time, for the first time, they are all saying it together, "Supply must come down". The wild card remains new entrants.


If they are successful,

- Yield will go up
- Ticket prices will go up
- Load on ATC and the nations infrastructure will go down
- Carbon outputs will go down
- Delays will go down
- Pilot shortage, real or imagined will go away
- Pilot jobs will go away

In its current form the industry is unsustainable. Capacity cuts are the answer. If you are in the left seat a third or more up the list where you want to be and your airline makes it, this could be good. For everyone else, not so good. :(

Dead on. Another thing is...since all the majors are on board with this capacity constraint, it will be very difficult for new entrants to fill the void. In fact, almost impossible because it is a big void. Plus, with $90 oil, new entrants are not exactly coming out of the woodwork. It might just come together.

rvr350
12-04-2007, 08:27 PM
Explain what you're talking about for those of us that don't know what you're talking about?!?

I think he was referring to the pay increase that DAL pilots will receive if the company makes certain financial benchmark. Naturally, mgmt will try to "cook" the book, to make sure their numbers aren't exactly stellar, so the senior exec. can have a bigger bonus.

Flare Armed
12-05-2007, 07:14 AM
I have a lot of trouble with the "excess capacity" argument. Our planes are 85% full most of the time, and most other airlines are right there too. Fares need to go up, plain and simple. And losing the "leisure traveler" is not much of a loss, sense they believe they have the right to fly for free anyway.

Albief15
12-05-2007, 07:37 AM
FWIW, this isn't just a Delta issue. SWA was going to buy 32 planes last year, but went to 16 (hence the pool!). What I read yesterday was a the retiring of old birds/purchase of new birds meant a net gain of 5-6 jets. They are also trying to reduce their pilot/plane ratio. At FedEx, management is doing what they call a "hard freeze", or lock down on spending not directly related to moving freight.

All of this points to companies anticipating/experiencing a slight downtown in revenue with increasing costs. SWA and FDX have historically tried to manage costs in down markets with pretty good success. The leaner Delta appears to also be trying, but we'll see how well they do. Point to this is that everyone is adjusting at the moment, and any company is a bit pinched this season.

acl65pilot
12-05-2007, 07:45 AM
The load factors come from rock bottom prices. Raise the prices and people go away. The big fear is that too many will go away, and the airlines will not be able to offset the loss of load factor with the increase in per seat yield.
The airline managers are very scared of this. I think that there is some more elasticity of the current price point. Not much, say 10-30 dollars per ticket, but there always is some one that does not play along.
With reducing capacity, it takes out some of the infrastructure cost associated with the operating margin, thus allowing higher ticket prices on the remaining seats.
Shrinking to profitability goes against business 101, but for some reason it is the only way that the airlines can do it. Lets just hope that the shrinking is done right.
I also believe that the only reason that no one has merged to date is with a merger comes a loss of lift. History shows that the lift is replaced by someone else. There is never a long term increase in ticket price. It only lasts as long it takes someone else to over serve a route. Until the airlines can find a way to avoid this, mergers may not happen. That is if they have learned from history.

rvr350
12-05-2007, 08:22 AM
The load factors come from rock bottom prices. Raise the prices and people go away. The big fear is that too many will go away, and the airlines will not be able to offset the loss of load factor with the increase in per seat yield.
The airline managers are very scared of this. I think that there is some more elasticity of the current price point. Not much, say 10-30 dollars per ticket, but there always is some one that does not play along.
With reducing capacity, it takes out some of the infrastructure cost associated with the operating margin, thus allowing higher ticket prices on the remaining seats.
Shrinking to profitability goes against business 101, but for some reason it is the only way that the airlines can do it. Lets just hope that the shrinking is done right.
I also believe that the only reason that no one has merged to date is with a merger comes a loss of lift. History shows that the lift is replaced by someone else. There is never a long term increase in ticket price. It only lasts as long it takes someone else to over serve a route. Until the airlines can find a way to avoid this, mergers may not happen. That is if they have learned from history.

Very good observation. Also, the airline execs have to always play "the wolf's coming" with the Wall Street, in a sense that if they don't tell investors that the company stock may not do well in the next quarter, and it does tank, the high-paid exec. may be to blame (what a concept, huh?:)

Also, the price war is always a very fine line. All the fuel surcharge is doing is trying to find a fine line between maximum profits vs. loss of customers due to this price increase. In another way, they want to find the top price that an average traveler can afford to go from point A to point B without the guy saying "Screw XYZ, i'm gonna drive/I'm taking SWA instead" It's rather sad actually, when AmTrak charges more than an airline ticket these days.

acl65pilot
12-05-2007, 09:20 AM
It's rather sad actually, when AmTrak charges more than an airline ticket these days.

Yes, but it is true that AmTrak has a monopoly. It can charge what it wants to for that market. It has its defined group of customers, and they know that they will pay what they have to NOT to fly.

skywatch
12-05-2007, 02:01 PM
Hey, here is a crazy idea...assuming most airlines are already full or close (85% load factors for everyone)...what would happen if American or the like decided to QUADRUPLE their airfares? Surely people would try to book away or find another means of transport, but no many business folk are willing to drive from NY to LA, and there is only so much room on the rest of the carriers to pick up the slack (they are, for the most part, full as we have observed)...a certain number of passengers would HAVE to fly AA if they wanted to get to their destinations, right...so, instead of carrying 4 people paying $100 a ticket, maybe they are carrying one person paying $400 a ticket...he might not be happy, but tough luck. And what if DL and CO and the other carriers saw this, and decided hey, we can raise our fares too...because just like they said with gasoline prices (no one will drive when gas is $3 a gallon, right? WRONG.), maybe there is some room to raise airfares because people have to fly...period.

OK, now take turns as you shred this theory of mine please.

fosters
12-05-2007, 04:38 PM
OK, now take turns as you shred this theory of mine please.

History has shown that the other airlines will undercut the airline that raised fares to attempt to drive them out of business. There is a huge precedent.

satchip
12-06-2007, 03:10 AM
Realize that there is a certain price point that the consumer will just not fly. They will choose some other means of transport or just not travel to that destination. The business traveler that would and could afford to pay those higher fares are moving to corporate/fractional ownership and technology to replace traditional airline travel. Add to that the above statement and you see the problems faced by the marketing wiz kids.

The supply demand curve for air travel has changed from one of inelastic demand to one very much elastic at least domestically.

Sike
12-06-2007, 08:39 AM
There is only one simple solution to all of our problems: reduce the competition in the market.

Not too many years ago, airlines primarily made their money off of business travelers... not the traveling public/vacationers etc. If carriers disappear and the level of competition diminishes, I would hope the same principle would support the industry. However, due to the structure of our government, including Chapter 11 protection, I am not sure it will ever happen and the downward spiral may well continue.

Consolidation is healthy for the long term future of the industry, but will make for miserable lives for many junior pilots in the short run. The only hope is that the pilot shortage on hand will play into our hands the way we all hope it will.

pilotss
12-06-2007, 09:04 AM
I wish airlines could triple prices...but,

Travel back to the days when everyone wore suits to travel and the golden age of aviation existed. People did pay triple in price for those tickets with government subsidies included.

Now with low fares everyone with a trailer flies. That can be good if you look at all the jobs it created but the margins are much less and the subsidies are no longer rolling in to the bank.

Could airlines raise prices? Absolutely, but there would be a lot less pilot jobs out there.

Xray678
12-06-2007, 10:24 AM
There is only one simple solution to all of our problems: reduce the competition in the market.

Consolidation is healthy for the long term future of the industry, but will make for miserable lives for many junior pilots in the short run. The only hope is that the pilot shortage on hand will play into our hands the way we all hope it will.


I agree with you. Done correctly consolidation would probably be a positive. But, a merger among the legacies will not fix the problems faced by the industry, namely overcapacity and the inability to control capacity.

During the early 2000s the legacies were all cutting back on capacity. The LCCs were adding it as fast as they could. A round of mergers ending up with only 3-4 legacies would be a very short term fix. Whatever capacity is taken out will be put right back in by the LCCs.

Probably the only consolidation scenario which works would be if each legacy carrier merged with an LCC in order to really be able to take some capacity out of the system and better control future capacity growth.

pilotss
12-06-2007, 11:49 AM
Hi Xray,

That will be interesting to see if that cycle repeats itself. With projected decline in domestic market the legacy carriers are already shifting to international expansion and some are contracting domestically. Will they pick up that slack again or will there be enough to warrant adding the extra routes that the legacies may have cut?

The next few years may be tough for the LCCs. And how do you guys think the regional will fare. Contracts that are due when domestic markets are tight may not be very pilot friendly.

I guess there is always Kingfisher.

Xray678
12-06-2007, 01:12 PM
That will be interesting to see if that cycle repeats itself. With projected decline in domestic market the legacy carriers are already shifting to international expansion and some are contracting domestically. Will they pick up that slack again or will there be enough to warrant adding the extra routes that the legacies may have cut?

The next few years may be tough for the LCCs. And how do you guys think the regional will fare. Contracts that are due when domestic markets are tight may not be very pilot friendly.


It will be interesting. So far though, the LCCs seem to be acting with a little more restraint toward adding capacity.

The regionals, wow, tough call. I would normally say that the number of regional jobs will decline. The 50 seater is a dinasuar that can't make money with fuel prices this high, and I suspect the 70 seater is not a whole lot better. That said, I think there will be tremendous pressure on the legacy pilots to once again cave on scope, and you could see the regionals staying about the same in terms of number of airframes, only the airframes are bigger.


If the legacy pilots stand firm on scope, the RJ era is drawing to a close. But we face an even bigger danger now in letting the cat out of the bag with outsourcing of mainline size flying. That will be the other interesting thing to watch in the coming years.

pilotss
12-06-2007, 01:15 PM
Think the turbo-props will ever surface again?

rvr350
12-06-2007, 01:21 PM
Look at the Bombardier's Q400. It's a much better product than any CRJs out there. Faster, cheaper to operate, more passenger friendly. As long as the pay is acceptable and mainline flying it, who cares if it's a Cessa 152!

JoeyMeatballs
12-06-2007, 02:06 PM
Look at the Bombardier's Q400. It's a much better product than any CRJs out there. Faster, cheaper to operate, more passenger friendly. As long as the pay is acceptable and mainline flying it, who cares if it's a Cessa 152!

Thats funny, better products usually don't have their gear collapse every other week...............

DAL4EVER
12-06-2007, 02:07 PM
I agree that I think its a great product. However, the q400 cruises at 360 kts while the RJ cruises at 420-440. With oil prices this high, I would think that the turboprops would be very compelling. Especially on routes less than 500 miles and anything in the northeast.

flyingkangaroo
12-06-2007, 02:46 PM
If the airline industry in the US shrinks im willing to put money on it that virgin will jump all over everyone. Don't bend over boys and girls Branson is standing behind you. I read an article a while back saying virgin was going to start refining their own oil. Oh boy...

Jetjok
12-06-2007, 03:30 PM
Like asupilot, I too don't understand why any company that sells a product, and has it's operating costs to deliver that product, increase, but does not pass, at least partially, that increase along to the people who buy the product. This makes no sense whatsoever. The cost of milk, cereal, fruit and vegetables, and most other products have gone up recently, all at least partially due to the increase in transportation costs (gasoline) to bring these products to market. FedEx and UPS as well as most local shippers and transporters have raised their prices to allow themselves to not have to take on this upward spiraling financial burden. But the people-carrying airlines never seem to get it. They're always concerned that if they raise the price of a ticket, even a few dollars, that they then won't be the low cost carrier and not appear at the top of some web page. It's very sad, especially considering that they always seem to be demanding more in the way of givebacks from the employees who carry the airlines on their backs. Why don't they all get together and agree to some sort of standard "fuel tax" that they would all charge, thereby allowing the users of their product to foot the bill for the increase? Personally I don't believe that someone, or a whole family (for that matter) would cancel their air travel plans because the price of their ticket went up a few bucks.

Sike
12-06-2007, 05:25 PM
I think that initially, "consolidation" would include a bit of a reduction in capacity. However, I don't really think there is a huge excess right now. Look at the record load factors, etc. Granted, if the ticket prices rise, there will be some number of travelers who are priced out.

In the long term, I think capacity - especially internationally - will only grow. Just look at the forecasts for growth in worldwide aviation for the next 20 or so years. Keep in mind though, a LOT of it will be in Asia and the Middle East.

Rise of the turboprops? Maybe on the very short regional flights that RJ's are now operating on (less than 1 hour).

BeenThere
12-06-2007, 06:02 PM
Airlines are not to be understood, they are to be worked for. Airlines don't provide service for passengers, they provide fat paychecks and golden parachutes for executives......

Sad, but true. :(

Somebody buy that man a cigar! Reading between the lines of Ed Bastain's announcement: "We don't have a clue what we're doing so we're going to go do something international. That won't work either, but it'll make Wall Street happy till we can sell this thing and pop the golden chute!"

BTW it's a myth that there's "overcapacity" in the system, as prevous poster noted with 80%+ load factors. Truth is if some legacies merged and parked a few jets a new LCC will start up and add the capacity right back. Until we make it illegal to start a new airline the cycle will continue.

JoeyMeatballs
12-06-2007, 06:05 PM
I think that initially, "consolidation" would include a bit of a reduction in capacity. However, I don't really think there is a huge excess right now. Look at the record load factors, etc. Granted, if the ticket prices rise, there will be some number of travelers who are priced out.

In the long term, I think capacity - especially internationally - will only grow. Just look at the forecasts for growth in worldwide aviation for the next 20 or so years. Keep in mind though, a LOT of it will be in Asia and the Middle East.

Rise of the turboprops? Maybe on the very short regional flights that RJ's are now operating on (less than 1 hour).

Yeah, but they feel the load factors are as high because it is so cheap to fly..............As if people just wanted to go flying to take a trip to the airport. If they have to fly they will pay, I just don't understand it either. Nobody is asking them to raise the tickets by $20.00, but its gotta be something

BeenThere
12-06-2007, 06:11 PM
Think the turbo-props will ever surface again?

The only aiframe customers hate more than an RJ is a prop job. or anything they have to walk outside to board.

Xray678
12-07-2007, 04:27 AM
BTW it's a myth that there's "overcapacity" in the system, as prevous poster noted with 80%+ load factors. Truth is if some legacies merged and parked a few jets a new LCC will start up and add the capacity right back. Until we make it illegal to start a new airline the cycle will continue.


Overcapacity is a relative thing. We could have 100% load factors if we cut airfares in half. Capacity needs to be matched to the ability to operate the company at a consistant profit. Too much capacity affects you ability to sell tickets at a price where you can make money.

You are right though about the LCCs. Barriers to entry in this business are almost none existant. Yet the government will do anything it can to keep an airline from going out of business. So overall, the capacity of the industry will always be high enough that it limits the ability to turn a profit. I think you will find, with few exceptions, that a new LCC only makes good profits in the early years. Once they have been around a few years and are a "mature" company, their profit margins are pretty much in line with the legacies.

visceral
12-07-2007, 06:54 AM
The only aiframe customers hate more than an RJ is a prop job. or anything they have to walk outside to board.

In the era of sort by the lowest price, you think consumers are willing to pay a premium for a jet on a 1.2 hour flight?

BeenThere
12-07-2007, 07:07 PM
In the era of sort by the lowest price, you think consumers are willing to pay a premium for a jet on a 1.2 hour flight?

Yes, given the choice between a jet and a turboprop they will usually pay a small premium for the jet, but not much. Depends on schedule, frequent flyer loyalty, and a few other factors. Unfortunately we have conditioned the mareketplace to expect premium service at WalMart prices, and they raise all kinds of hell if we don't deliver. Maybe we should double the fares. If the load factor went down 50% we'd still have the same revenue, burn less fuel, and commuters could get to work & back!

champ42272
12-08-2007, 10:32 AM
ASUPILOT/MOLSON 247,

I believe you are both right, except what would be wrong with slightly lower load factors in the majors (now over 80%) and taking more revenue? Answer: It is not about revenue, it is about market share, always has been, always will be.

Joel Payne hit it right on the head, the object of the game is to be the last one standing after consolidation. That day, or re-regulation of the airline business (if Congress ever really had to fly the airlines) is soon upon us.

Just my opinion, I could be wrong.


Champ 42272

Character is Destiny

smee
04-11-2008, 03:53 PM
Wow! Airlines--seemingly as a rule--don't make money... they GENERATE it. I completely agree with ASUPILOT in that prices need to go up if costs go up. Ask anyone who works--or tries to work--a balance sheet for an airline what their target demographic is and I will guarantee you that the emphasis is on the Business traveler (for the Legacies anyway...). As for the leisure traveler, you get what you pay for. There are fewer and fewer people with any loyalty what-so-ever to any particular airline. It is simply a function of what was cheaper when they plugged some basic info into a search engine.

Air Travel is a luxury and used to be treated as such. I'm happy to pay the premium to fly American, Delta or United (now that there's no TWA, have to divide my loyalty). While Air Travel definitely isn't what it used to be, if you want to fly on a bus, that's now an option as well. Just don't complain about it when you're herded through multiple ques and have to pay extra for a sick sack...

scardini1
04-11-2008, 04:26 PM
The idea of scaring away passengers is B.S.

Business 101: if you're selling out of your product (seen many empty airplanes lately?), you RAISE your prices! Sure you're going to lose some customers, but you'll probably have more profit. If that happens - YOU RAISE YOUR PRICES AGAIN, and keep doing it until you reach a point of diminishing return. NOW you know what the right price is for your product. Sure, some may go to the competition, but how many available seats do YOU see for them to go?

After an MBA presentation on yield vs. load factor, I asked the professor, "so Dr. Murphy, WHAT should the airlines do?" After he checked the veracity of my data and sources, he sat back and said, "WHAT A BUNCH OF IDIOTS! THEY NEED TO RAISE THEIR PRICES!" I rested my case.

You can raise prices 25%, lose 20% of your passengers and make more money. Why? Because, even though that's a break even point, you're burning less fuel to carry fewer folks. You also need fewer reservationists, baggage handlers, etc.

One economist even said, "The idea of over capacity has been relegated to urban legend."

Well so much for THAT soap-box.

Ciao

TheNid
04-11-2008, 04:33 PM
"By RUSSELL GRANTHAM
The Atlanta Journal-Constitution
Published on: 12/04/07"...original post

Wow...this thread sure had some new life breathed into it...

texaspilot76
04-11-2008, 08:13 PM
I think mergers are the way to go. Less airlines and airplanes will make for less supply, which will drive prices up. The higher prices will bring more revenue, and then maybe paychecks will go up. Example: I bet some of those stranded American passengers would have paid big time money for a way to get home. Less supply gets more money. I wish airlines would lesson the supply, maybe form a sort of cartel or alliance among each other like the oil companies. Then profits would be huge.


In addition, less airplanes in the air might help contribute to lower oil prices since there will less fuel consumed.

jsled
04-11-2008, 09:48 PM
I think mergers are the way to go. Less airlines and airplanes will make for less supply, which will drive prices up. The higher prices will bring more revenue, and then maybe paychecks will go up. Example: I bet some of those stranded American passengers would have paid big time money for a way to get home. Less supply gets more money. I wish airlines would lesson the supply, maybe form a sort of cartel or alliance among each other like the oil companies. Then profits would be huge.


In addition, less airplanes in the air might help contribute to lower oil prices since there will less fuel consumed.

You mean like forming unions? Careful, you might become some liberal, France loving Democrat. "Cartel....Alliance"...those are not the words of a Republican Texan. :)