Not to be a downer, but.....

Skeeter

Skeeter

New Member
I read this article this morning... I'm not trying to bum anyone out, but I'm wondering what you guys/gals take is on this article.... I'm not on the pulse of the 121 side of things, but it sure doesn't seem that there are less flights going out these days than there has been in the recent past..post 911 slow down. I realize the cost of fuel has gone up too..but is that really why these people can't pay the bills? Seems like only a part of the problem... I sure as hell don't think it's because of the pilots salaries which the mgmt seems so eager to chop. So tell me, is it just gross mis-management or what?

Anyway.. sorry if these questions are like beating a dead horse.



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Won't raise the prices to reflect the actual cost of flying Johnny from point-A to point-B. Especially when if you look at inflation-adjusted oil costs, a barrel should really cost upwards of $100/bbl.

There's a lot more 'in play' than most people realize in the industry and it's prime opportunity for the ATA to roll pay back and working conditions back to 1980's levels (unadjusted for inflation, of course).

Primarily why my 'love of my profession' in 1998 is pretty much just a 'tolerance of a job' today.
 
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Won't raise the prices to reflect the actual cost of flying Johnny from point-A to point-B. Especially when if you look at inflation-adjusted oil costs, a barrel should really cost upwards of $100/bbl.

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That's a part that I don't get though. I mean, there are carriers out there that can provide the service from A to B, cheaper AND turn a profit... What is stopping the Major's from catching on to this in both Management and Operations? Seems like the sluff is in the Management side of things. I probably don't understand the diff between the sides of the biz though..
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The tolerance part of your post is a real bummer
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Nah, just that as I get older, I like to create things and put them into motion. Kind of like playing legoes! But being away from my wife for 17 days a month and doing 9 hr 30 min Jackson, MS layovers is kind of cheesy for me.

I'm kind of an explorer by nature and I think once I'm able to hold international flying with some digestible seniority it'll swing back the other direction!

I think when you're moving up and you stay hungry you see one perspective. But when you're stagnant for years, it's another. But those depend on the individual.
 
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Won't raise the prices to reflect the actual cost of flying Johnny from point-A to point-B. Especially when if you look at inflation-adjusted oil costs, a barrel should really cost upwards of $100/bbl.

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That's a part that I don't get though. I mean, there are carriers out there that can provide the service from A to B, cheaper AND turn a profit... What is stopping the Major's from catching on to this in both Management and Operations? Seems like the sluff is in the Management side of things. I probably don't understand the diff between the sides of the biz though..
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The tolerance part of your post is a real bummer
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One of the reasons Southwest is doing so well is that they hedged against the price of oil.
I read somewhere that they are buying 80% of their oil at like $25/barrel while the majors are paying full price $55/barrel. Thats a huge advanatge, hard to compete with that.
 
Actually, airlines don't buy oil
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But the "brain-trust" at a certain airline thought that prices were going to sink lower than their contractural hedge rates and decided to sell the hedges in anticipation of lower fuel prices.

Don't ask which airline because I'm not going to tell you!
 
It's certainly part of the problem. Today's front page article on the Delta situation showed all the majors' cost of fuel per gallon this year and last year. All of them are paying around $1.20-something this year, versus around .75 last year. All of them except Southwest, which still has hedge contracts in place and they're paying .80/gallon this year.

Wanna guess who's the only one in the black thru 3rd Quarter 2004?
 
Yeah...but I just don't buy that it's a major cause. I agree that it's part, but there are thousands of other businesses that are hurt by the gas hike, yet they are still in the black. Maybe not quite as in the black but still there. To me it just seems there is some serious mismanagement going on. I'm just trying to get some other opinions from those that are a little closer to the 121 side of things.
 
Simplest explanation is that during the long economic upcycle of the 80s and 90s the airlines overexpanded, built too many hubs, and pretty much lost control of their expenses. To top it off they expanded by borrowing heavily. Now the fall will be hard.

As ALPA president just said a few days ago, there has to be about half as many hubs and a few mergers if it's going to turn around.

Fuel costs are tough, but even at these levels are less than labor costs.

Last factor, the majors have senior workforces and billions and billions of dollars worth of pension obligations.
 
The real problem for the airlines is that they arent making enough money.
The real problem for the yankees last nite was the fact that they scored less runs then the sox.
 
My opinion is there are two major causes.

(1) Airlines are operating on a very, very tight profit margin. For several reasons, fuel price included, the operation costs are quite high. In order to keep passengers, fares must be competetive, i.e. lowered. And quite a bit of the fare goes toward taxes, airport fees, security fees, etc., so the company profit decreases, closing the gap between expense and proft. Eventually, the profit sinks below expense, and the company loses money.

(2) There are too many service providers. I'll use a simple example. If the public spends $50 million a year on flight travel via airlines, and there are 10 airlines, each one gets $5 million income. If 5 airlines go out of business or merge, now each airline gets $10 million income per year. The number of passengers and what they spend on airfare hasn't changed, but the number of companies getting that money has. And now those companies double their income, making the profit/expense gap larger.

I'm not a business person by any means, and I could be blowing smoke, but that's MHO.
 
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Wanna guess who's the only one in the black thru 3rd Quarter 2004?

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ahemm.............. a certain blue airline who also hedges is in the black also
 
You're right Rab. We should "recognize" da blue.. Fer shizzle.

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(1) Airlines are operating on a very, very tight profit margin. For several reasons, fuel price included, the operation costs are quite high. In order to keep passengers, fares must be competetive, i.e. lowered. And quite a bit of the fare goes toward taxes, airport fees, security fees, etc., so the company profit decreases, closing the gap between expense and proft. Eventually, the profit sinks below expense, and the company loses money.

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This is true, but herein lies the problem. The tight profit margins are why I think there is mismanagement. In my industry, we have tight margins also. Something like 3-5%. That's why we spend so much time and effort making sure we trim the fat and not the meat that makes the money. To me and from an outsiders perspective, the airlines have gotten too big for their britches. For ex. they spend a bunch of money re-painting new colors on their planes because marketing say it'll make more customers, when in reality the cost doesn't get rewarded. They try cutting operations (pilots, maintenance, etc) but they're the ones keeping the airline making money. Maybe they're cutting just as many mgmt or bureaucratic jobs but I'm never hearing about it. Are you? Not taking delivery of new planes is a good move IMHO.
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