Why is the industry so unstable?

[kellwolf]

Not only that, but just ten or so years ago pilots got a lot of respect and aircraft have barely changed since then. I think what it really is is the public's perception of pay. Ten years ago: "Oh wow! Pilot. You must be making half a million!" Today: "Pilot, too bad! How's those food stamps working out?" In other words, people get stereotypes about the pay influenced but what they hear in the media and so forth.
Incidently, when I tell people, especially the ladies, I'm in training to fly professionally, they are always greatly impressed. :insane: I guess perception varies.

Don't know. I still get the "You're a pilot? I figured you'd be loaded" thing. When I was in the process of buying my house, we were doing income verification, and my real estate agents was amazed we were even bothering. The loan office we went through was run by a guy who went to Delta State and had friends at FedEx, PCL and NWA, so he knew what was going on.

 

[WAFlyBoy]

No independent carrier to my knowledge just moves packages, except the USPS, and they need the government to keep them afloat.

The USPS consistently earns an operating profit on postage revenue. (I remember reading a while ago that the USPS is the only U.S. government organization to operate independently of treasury monies.) The USPS, Department of Energy, and Department of the Treasury have all published material which supports this claim.

What sources claim the goverment keeps the USPS afloat?

 

[ChrisH]

Making money with airplanes shouldn't be that hard, if you charge for what the service/product costs. If an airline with 1,500 flights per day, arranged fares such that they averaged a profit of just $2,500 per flight, which would not increase fares too significantly, that airline could make $1,368,750,000 per year. Instead, you have flights that profit $200, while others lose.

If it costs $28,000 to operate a flight from JFK-LAX, between fuel, labor, etc., and an 8AM departure averages 100 passengers, bare minimum should be $280 per person to break even. Obviously breaking even isn't what you want to do; you want a profit. If your goal is to average a profit of $2,500 per that flight, over the course of a year, you should charge a minimum of $305 for that flight. I also think airline should do away with the one person paying $100, while the person next to them pays $800. The airlines might fear they will turn the $100 passenger away, when they have to pay $305, but I disagree. The person who would normally pay $800 will jump at the $305, and thus it evens out. Also, people are all about the convenience factor. $305 is still extremely cheap to fly across the country. Not to mention you would probably pay that in gas trying to drive that anyway.

The airlines could do a little research, determine the average number of passengers per flight, per departure, per time of the year, and arrange fares to average a certain profit per day, over the course of a year, for that flight.

I also think something needs to be done about "round-trip" airfare. If someone buys a one way ticket from ABC to DEF, it costs $700, but if they get a round trip ticket, it costs them $300. I say if it costs $305 to fly from JFK to LAX, and you want to come back, you pay another $305. That is still just $610 for a round-trip, cross country flight. Still not that expensive, considering what is involves (someone flying you across the country).

The above may be a little over simplified, but in theory, it would work, if all of the airlines would do it.

 

[wheelsup]

The above may be a little over simplified, but in theory, it would work, if all of the airlines would do it.

I think you way over simplified it. Revenue Managament is probably the #1 important job at an airline. That show about American on CNBC back a few weeks ago really delved into how much money airlines make on specific flights. I think they had one flight on there that made $50. Another made ~$800, and they were happy with it.

The USPS consistently earns an operating profit on postage revenue. (I remember reading a while ago that the USPS is the only U.S. government organization to operate independently of treasury monies.) The USPS, Department of Energy, and Department of the Treasury have all published material which supports this claim.

What sources claim the goverment keeps the USPS afloat?

From a report published in 2003, located here:

One sign of trouble at the USPS, noted by the GAO, has been its changing financial estimates. Due to increasing use of e-mail and other electronic alternatives, USPS mail volume has declined in recent years, leading to financial difficulty for the USPS.7 The Postal Service's consistent misestimates of expected returns have only made the problem worse. For instance, the Postal Service's estimate of its FY 2001 budget deficit was $480 million in November 2000 but grew to an estimated $2 billion-$3 billion only three months later. The final deficit was $1.7 billion. The next year, the estimated $1.35 billion deficit for FY 2002 grew to $4.5 billion only six months later.8 The final 2002 deficit was $676 million.

2 years in a row, $2.3 billion in loses total for just those two years. Hardly profitable. Do you have some sources that say they earn a profit?

 

[surreal1221]

Let me get this straight - I make a patently obviously stupid statement and you want to argue that the statement isn't true based on the facts?

Have at it.

The sky is a greenish purple color as well - take a run at that while you're on a roll.

Not at all. . . I must of missed the sarcasm tag.

 

[WAFlyBoy]

2 years in a row, $2.3 billion in loses total for just those two years. Hardly profitable. Do you have some sources that say they earn a profit?

Yes, indeed I do have sources that indicate that the USPS earns a profit. In fact, it is the same source that claims the losses you are referring to. You are correct: the USPS did experience accounting losses during the time period that the article references. However, the material you've cited goes no further than 2003.

The USPS financial statements (as audited by Ernst & Young and found to be in accordance with U.S. GAAP) show a streak of operating losses starting at YE00 and ending at YE02. The statements also show operating profit for the years ended 2003-2005. In fact, the net profit for these years exceeds $8.2 billion, more than covering losses from previous years.

In response to slowing mail volume growth, the organization decreased its workforce and improved revenue with increases in postage. In addition, the USPS engages in periodic advertising campaigns to compete with higher-cost rivals FedEx and UPS.

It is also noteworthy that, according to the audited balance sheet, capital contributions from the U.S. government have not changed since 2001. (In other words, no tax revenue was used to support the USPS as a business.)

This information can be found in the USPS annual reports, which are easily obtainable on the USPS website.

And I feel like a total dork for taking the time to write this.

 

[WAFlyBoy]

" Today: "Pilot, too bad! How's those food stamps working out?"

Food stamps? Why the hell didn't anybody tell me sooner? Where do I apply?

 

[fender_jag]

Food stamps? Why the hell didn't anybody tell me sooner? Where do I apply?

Next door to the Starbucks that they're building in downtown Atwater.

 

[Nick]

downtown Atwater.

I didn't know there was such a thing!

 

[killbilly]

As of this time last year (I don't have access to the insider anymore) SWA made a profit of between $3-4.50 per passenger.

Just saying.

 

[fender_jag]

I didn't know there was such a thing!

Oh come on, Nick, you're missing out! It's the place to be...

 

[WestIndian425]

Yes, indeed I do have sources that indicate that the USPS earns a profit. In fact, it is the same source that claims the losses you are referring to. You are correct: the USPS did experience accounting losses during the time period that the article references. However, the material you've cited goes no further than 2003.

The USPS financial statements (as audited by Ernst & Young and found to be in accordance with U.S. GAAP) show a streak of operating losses starting at YE00 and ending at YE02. The statements also show operating profit for the years ended 2003-2005. In fact, the net profit for these years exceeds $8.2 billion, more than covering losses from previous years.

In response to slowing mail volume growth, the organization decreased its workforce and improved revenue with increases in postage. In addition, the USPS engages in periodic advertising campaigns to compete with higher-cost rivals FedEx and UPS.

It is also noteworthy that, according to the audited balance sheet, capital contributions from the U.S. government have not changed since 2001. (In other words, no tax revenue was used to support the USPS as a business.)

This information can be found in the USPS annual reports, which are easily obtainable on the USPS website.

And I feel like a total dork for taking the time to write this.

Don't feel that way. There's a reson why I call you the guru. I must say that I was under the impression that the USPS, as a governent enterprise, was being subsidized by the government. I had no idea they were profitable. If that's the case, then there's hope for Amtrak.

Food stamps? Why the hell didn't anybody tell me sooner? Where do I apply?

Next door to the Starbucks that they're building in downtown Atwater.

I didn't know there was such a thing!

ROFL!!

Here's a debatable question: which is more important -- market share or profitability? I find that this is the difficult thing that an airline has to decide especially when it comes to entering new markets. If market share is first priority, when does it switch over to profitability? Also, how does this work into an airline's projections so that they can determine whether they can sustain the drive for market share vs. profitability?

I ask this because of the ocassional $8 fares from Spirit, $50 from B6, $49 from FL and NW, and the list goes on...

For the most part, this is relatively easy when it's a domestic issue. It gets more complicated when you deal with international flying.

 

[WAFlyBoy]

Here's a debatable question: which is more important -- market share or profitability?

They are not mutually exclusive. I would say that improving market share could lead to improved profitability in a well managed organization.

I'm not sure what the strategy is behind the fare sales you're citing. Perhaps they are selling seats that would have otherwise been empty for a deep discount so passengers will try their service (in an effort to seat market share from competitors). But that's another can of worms.

 

[kellwolf]

Don't feel that way. There's a reson why I call you the guru.

Ah yes. Late night kitchen discussion about FARs. Those were the days.

 

[Takelon9]

I think the legacy airlines should be allowed to become a cartel, or atleast allowed to have some major mergers. If the legacys were allowed to become a cartel they could make sure that they wern't undercutting each other to the point of making their respective companies unprofitable. With government regulation to prevent price gouging, they could become profitable enough to dramaticaly reduce government funding.

The legacys would still have competition in the form of the discounts, private jets, etc. where there would still be price competitions, but the legacys could make up for the losses in potential profits of lines that the discout decide not to pick up. Also, they could combine their routes to ensure more direct trips. This would help in two ways. First, it would help as a customer benifit. Who really wants to hop 2 or 3 flights when they can just take one even if you are charged a little more. Also it will save the airlines money on expensive fuel. Instead of a having to buy 200 gallons of fuel to get a customer from point A to B and then another 300 form B to C they could just buy 400 to get them from A to C.

Also, with all the legacys working together they could launch a campaign to help educate the public about the true costs of flying through the news, commercials, mail, etc. This will help make it more acceptable to customers to charge higherprices. I don't think the average person really understands the costs involved. I know, as someone still going for their pvt. pilot, I don't know them.

I think another important component that others talked about is customer service. If you treat the customer like a king/queen they are going to be more willing to pay a little extra just to feel more in power. The legacys could come up with a special express security check lane for frequent fliers. The bigest change has to be with the luggage check. These people are often incredibly rude and unsympathetic to others. There needs to be strict regulations dealing with how to deal with customers, and just as strict of penaltys for failing to adhear to them. THose are just a few ideas.

P.S. I know that the legacys would never be allowed to become a cartel, and almost and merger would also be shot down. I was just stating what I felt would help the industry. I welcome any constructive criticism.

 

[WestIndian425]

I think the legacy airlines should be allowed to become a cartel, or atleast allowed to have some major mergers. If the legacys were allowed to become a cartel they could make sure that they wern't undercutting each other to the point of making their respective companies unprofitable. With government regulation to prevent price gouging, they could become profitable enough to dramaticaly reduce government funding.

The legacys would still have competition in the form of the discounts, private jets, etc. where there would still be price competitions, but the legacys could make up for the losses in potential profits of lines that the discout decide not to pick up. Also, they could combine their routes to ensure more direct trips. This would help in two ways. First, it would help as a customer benifit. Who really wants to hop 2 or 3 flights when they can just take one even if you are charged a little more. Also it will save the airlines money on expensive fuel. Instead of a having to buy 200 gallons of fuel to get a customer from point A to B and then another 300 form B to C they could just buy 400 to get them from A to C.

Also, with all the legacys working together they could launch a campaign to help educate the public about the true costs of flying through the news, commercials, mail, etc. This will help make it more acceptable to customers to charge higherprices. I don't think the average person really understands the costs involved. I know, as someone still going for their pvt. pilot, I don't know them.

I think another important component that others talked about is customer service. If you treat the customer like a king/queen they are going to be more willing to pay a little extra just to feel more in power. The legacys could come up with a special express security check lane for frequent fliers. The bigest change has to be with the luggage check. These people are often incredibly rude and unsympathetic to others. There needs to be strict regulations dealing with how to deal with customers, and just as strict of penaltys for failing to adhear to them. THose are just a few ideas.

P.S. I know that the legacys would never be allowed to become a cartel, and almost and merger would also be shot down. I was just stating what I felt would help the industry. I welcome any constructive criticism.

That sounds much like going back to a regulated industry. However, having done a study on deregulation, it was predicted that there will be many new entrants once the industry was deregulated; with consolidation (mergers, liquidations, hostile takeovers, etc.) taking place in the future.

The invisible hand at work, eh?

 

[CFIse]

The above may be a little over simplified, but in theory, it would work, if all of the airlines would do it.

You're a pilot aren't you? Never met a pilot yet who didn't know for SURE that he/she could run the airline better than it was being run.

Just exactly how stupid do you think the people running todays airlines are?