Fuel costs to begin seriously affecting airlines?
- Thread starter MikeD
- Start date
Ophir
Well-Known Member
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Baggaley estimates that of the six major carriers -- AMR Corp.'s American Airlines, UAL Corp's United Airlines, Delta Air Lines, Northwest Airlines, Continental Airlines and U.S. Airways -- only three or four are likely to make it to the end of the decade.
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I'll bet that by 2014 there will be five legacy carriers; US Air will be gone. My feeling is that as the new wave of LCC's come in and goble market share, the new source of revenue for the Legacys will be international markets due to the future of relaxed cabotage policies. I think the will turn to emerging markets to strike up agreements with foreign competitors. BUt the domestic front will be 50% LCC's.
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"There isn't any legacy carrier in the nation that can say with certainty that a bankruptcy filing is not possible," said Kudwa.
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No but Gordon Bethune has done a pretty remarkable job in the past two years. I am really surprised he is stepping down. "Where have all the good CEO's gone . . . ."
Ironically, the escalation of gas prices at the pump will only continue to make distant travel (read: airline travel) that much more affordable. Perhaps all those people driving 6mpg SUV's will take more vacations and the airlines will see an increase in pax that will offset fuel costs . . .a bit.
Baggaley estimates that of the six major carriers -- AMR Corp.'s American Airlines, UAL Corp's United Airlines, Delta Air Lines, Northwest Airlines, Continental Airlines and U.S. Airways -- only three or four are likely to make it to the end of the decade.
[/ QUOTE ]
I'll bet that by 2014 there will be five legacy carriers; US Air will be gone. My feeling is that as the new wave of LCC's come in and goble market share, the new source of revenue for the Legacys will be international markets due to the future of relaxed cabotage policies. I think the will turn to emerging markets to strike up agreements with foreign competitors. BUt the domestic front will be 50% LCC's.
[ QUOTE ]
"There isn't any legacy carrier in the nation that can say with certainty that a bankruptcy filing is not possible," said Kudwa.
[/ QUOTE ]
No but Gordon Bethune has done a pretty remarkable job in the past two years. I am really surprised he is stepping down. "Where have all the good CEO's gone . . . ."
Ironically, the escalation of gas prices at the pump will only continue to make distant travel (read: airline travel) that much more affordable. Perhaps all those people driving 6mpg SUV's will take more vacations and the airlines will see an increase in pax that will offset fuel costs . . .a bit.
stultus
New Member
[ QUOTE ]
Perhaps all those people driving 6mpg SUV's will take more vacations and the airlines will see an increase in pax that will offset fuel costs . . .a bit.
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I don't see that happening. Loads aren't the problem right now--check out any of the big 6s' load factors, they're about as high as they can get. Yet they aren't making money. Yields gotta improve, or business models have to be tweaked.
Perhaps all those people driving 6mpg SUV's will take more vacations and the airlines will see an increase in pax that will offset fuel costs . . .a bit.
[/ QUOTE ]
I don't see that happening. Loads aren't the problem right now--check out any of the big 6s' load factors, they're about as high as they can get. Yet they aren't making money. Yields gotta improve, or business models have to be tweaked.
kellwolf
Piece of Trash
If the legacy carriers get smart and re-focus on thier niche instead of chasing market shares, then they'll survive a bit longer. The reason those LCCs are doing well is b/c their route and pay structures support low fares and leisure travel. The legacy carriers have a LOT more involved than LCCs. If they keep trying to re-invent themselves as LCCs withouth starting over from scratch, then all they will do is hasten their demise. If they focused more on their product instead of cutting as many costs as they can (with the exception of CEO salaries, no one seems to want to do that), then they have a better chance. The flying public (esp business travellers) are starting to tire of cattle cars and tightly packed aircraft. I think in the next few years you'll see more people willing to pay the $$ for the ammenities and space on the legacies. They just need to hold on and not do anything stupid.
mpenguin1
Well-Known Member
I wonder where are those experts now, that have always said that it is cheaper to fly older fuel inefficent aircraft, rather than newer aircraft.
What was missing from the story, was that the Low Cost Carriers are flying the newer aircraft, therefor, helping to offset the pain of higher fuel prices.
What was missing from the story, was that the Low Cost Carriers are flying the newer aircraft, therefor, helping to offset the pain of higher fuel prices.
kellwolf
Piece of Trash
[ QUOTE ]
What was missing from the story, was that the Low Cost Carriers are flying the newer aircraft, therefor, helping to offset the pain of higher fuel prices.
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Or retro-fitting their older a/c. SWA is even putting new engines on their 737NGs in addition to the winglets. I think they upgrade their planes more than I upgrade my computer.....
What was missing from the story, was that the Low Cost Carriers are flying the newer aircraft, therefor, helping to offset the pain of higher fuel prices.
[/ QUOTE ]
Or retro-fitting their older a/c. SWA is even putting new engines on their 737NGs in addition to the winglets. I think they upgrade their planes more than I upgrade my computer.....
flyover
New Member
>>>]If the legacy carriers get smart and re-focus on thier niche instead of chasing market shares, then they'll survive a bit longer.<<<
Fighting for market share is the score card of competition. If you are losing market share you are losing. If by "niche", you mean hub systems then clearly that is correct, but they have do defend or increase market share there to survive. Not all hubs or hub carriers will survive this current situation. This point has been conceded by all the players, including the head of ALPA.
>>>The reason those LCCs are doing well is b/c their route and pay structures support low fares and leisure travel. The legacy carriers have a LOT more involved than LCCs. If they keep trying to re-invent themselves as LCCs withouth starting over from scratch, then all they will do is hasten their demise. If they focused more on their product instead of cutting as many costs as they can (with the exception of CEO salaries, no one seems to want to do that), then they have a better chance. <<<
Obviously product is critical. But the flying public has devalued air travel, this inclues the business traveler. The survivors will be able to offer a product at a price the public will buy, that is above their cost of production. They cannot set a price based on cost and hope the public will buy it. Customers set prices, not producers.
>>>The flying public (esp business travellers) are starting to tire of cattle cars and tightly packed aircraft. I think in the next few years you'll see more people willing to pay the $$ for the ammenities and space on the legacies.<<<
This has been said for years, since air travel has gotten so popular. Instead the business travelers have shown little propensity to spend for the amenities. Surely not at the level they were in the nineties. By 9/11 business travel was already off significantly. The trend for businesses is to spend less on travel and do less travel. Even if they were to reverse that "in the next few years" it wouldn't be soon enough.
>>>They just need to hold on and not do anything stupid.<<<
Unfortunately they are past holding on (and they've already done stupid things). They've held on to the point of mountains of debt, huge pension obligations, out of control costs, and junk credit ratings. BK or some kind of financial restructuring, along with a consolidation that eliminates some hubs (so they can effectively price their niche) is inevitable. The legacy carriers "held on" to a losing strategy way too long. Remember, while SWA has been consistently profitable, the legacy carreirs have been consistently unprofiitable, going way back. The business boom of the nineties was the only thing that kept this shakeout from happening a decade sooner.
This all was really set in motion by deregulation. It just took awhile for it to manifest.
The good news is that the other side of this should produce a realtively healthy, profitable industry.
Fighting for market share is the score card of competition. If you are losing market share you are losing. If by "niche", you mean hub systems then clearly that is correct, but they have do defend or increase market share there to survive. Not all hubs or hub carriers will survive this current situation. This point has been conceded by all the players, including the head of ALPA.
>>>The reason those LCCs are doing well is b/c their route and pay structures support low fares and leisure travel. The legacy carriers have a LOT more involved than LCCs. If they keep trying to re-invent themselves as LCCs withouth starting over from scratch, then all they will do is hasten their demise. If they focused more on their product instead of cutting as many costs as they can (with the exception of CEO salaries, no one seems to want to do that), then they have a better chance. <<<
Obviously product is critical. But the flying public has devalued air travel, this inclues the business traveler. The survivors will be able to offer a product at a price the public will buy, that is above their cost of production. They cannot set a price based on cost and hope the public will buy it. Customers set prices, not producers.
>>>The flying public (esp business travellers) are starting to tire of cattle cars and tightly packed aircraft. I think in the next few years you'll see more people willing to pay the $$ for the ammenities and space on the legacies.<<<
This has been said for years, since air travel has gotten so popular. Instead the business travelers have shown little propensity to spend for the amenities. Surely not at the level they were in the nineties. By 9/11 business travel was already off significantly. The trend for businesses is to spend less on travel and do less travel. Even if they were to reverse that "in the next few years" it wouldn't be soon enough.
>>>They just need to hold on and not do anything stupid.<<<
Unfortunately they are past holding on (and they've already done stupid things). They've held on to the point of mountains of debt, huge pension obligations, out of control costs, and junk credit ratings. BK or some kind of financial restructuring, along with a consolidation that eliminates some hubs (so they can effectively price their niche) is inevitable. The legacy carriers "held on" to a losing strategy way too long. Remember, while SWA has been consistently profitable, the legacy carreirs have been consistently unprofiitable, going way back. The business boom of the nineties was the only thing that kept this shakeout from happening a decade sooner.
This all was really set in motion by deregulation. It just took awhile for it to manifest.
The good news is that the other side of this should produce a realtively healthy, profitable industry.
mtsu_av8er
Well-Known Member
[ QUOTE ]
The good news is that the other side of this should produce a realtively healthy, profitable industry.
[/ QUOTE ]
No doubt. As in any industry, the dinosaurs slow the growth of all. Big and fancy doesn't mean successful.
The good news is that the other side of this should produce a realtively healthy, profitable industry.
[/ QUOTE ]
No doubt. As in any industry, the dinosaurs slow the growth of all. Big and fancy doesn't mean successful.