USA Today front cover on the AVIATION industry (repost)

[Lear70]

I want to know who moved this chat into "non-aviation".

We're talking about the biggest, single change in the face of commercial aviation history since deregulations and 9/11 and you think it's NOT about aviation?

Longhorn, if this was you, I'm going to recommend a reasonable-suspicion drug test to your employer. If it was someone else, you might want to redefine your definition of what is "non-aviation" versus what is "aviation" oriented.

Genius. Now... back to the AVIATION ISSUE

The article smacks of pre-conditioning the American public for upcoming fare increases, giving a lot of good reasons why they have to increase, but it also is alarmist in predicting how much loads are going to fall off without giving a price point at which that will happen.

I can't believe the entire day has gone by and no one has even briefly commented on the USA today front page article regarding oil prices, imminent fare increases and capacity pull-downs, and the result on leisure travel and related travel industry segments (cruises, hotels, etc).

While I think they are being alarmist at just how many people will quit flying, they did make it blatantly obvious that fare increases are coming. The question is, at what price point do you think people will stop flying?

For the leisure traveler? Certainly $10 a piece wouldn't stop them, but would $50? $100? With a family of 4 or 5 going to see the grandparents or going on a Disney Cruise, add $500 plus taxes to the bill and you just blew your spending cash for a couple days once you get to your vacation destination.

For the business traveler? Most of them expense it, but at what point will the manager say the cutoff is for viability of a face-to-face meeting or convention is worth it? $100 increase? $500 increase?

It's an important distinction because the LCC segment that relies so heavily on the leisure traveler and small-business executive, that breaking point becomes life or death for the carrier.

The legacies have, in all likelihood, a different breaking price point, but I can't imagine it's THAT much higher than the LCC's break point.

Although the article did a pi*s-poor job of spelling this out, where do YOU guys think the breaking point is and at what point will we suffer major passenger fall-out?

 

[SennaP1]

Did you say load factors are coming down. Great, maybe now I can use my non-rev "benefits" to go to Hawaii.

In all seriousness, I haven't read the article, I don't touch the USA Today, unless I am at work (and I haven't been the last 4 days).

The travelling public better get used to higher fares, its going to happen, it already has. I believe that the bizman revenue will always be there, no matter if the cost increases. I don't see too many biz guys driving LGA-DCA or BOS-LGA and all the other biz routes. We'll see about the leisure travellers....

 

[FLYLOW22]

Hmmm. Park RJs. Use larger jets. It sounds like 2008 will be the year of "undoing the 90's".

Many of us are all for higher fares and lower loads. Clearly, the airlines haven't charged enough money to run a sustained business plan for almost a few decades now.

Flying is not a right, it takes money. QUALITY, not QUANTITY should be the new creedo going forward.

There simply isn't enough resources in the industry to treat airplanes like greyhound.

Train, bus, car... or stay home if it costs too much.

 

[gutshotdraw]

Flylow, when did we start agreeing on everything......

 

[Lear70]

That got my attention in the article as well.

Delta unloading up to 75 small RJ's THIS YEAR?

Either that's a misprint or there's going to be much wailing and gnashing of teeth from the RJ affiliates.

I imagine that might be a combination from both NWA and DAL fleets, but that's a lot of 50-passenger jets to be dumping on the market. Ouch.

p.s. I don't read that paper except at work either, just happened to see the headline as I walked out of my hotel room yesterday and thought "holy crap, THAT should get someone's attention".

 

[Wesb737fo]

The thing that I read from the USA today article is the fact that alot of people will be priced out of the ability to fly when oil reaches +$150/bl. The American people will be priced out of alot things at this point.

This will lead to the elimination of cash weak smaller airlines and a total restructuring of the larger majors (NWA/DAL, AA, CAL and USAIR/UAL etc.) by large capacity cuts (i.e less jobs at majors). Even mighty SWA will have to adjust.

The question is will oil go this high, and if it does how long will it stay there? Will it be long enough to drain the cash of the F9, JBLU, AAI, Spirit type LCC's. Forget about getting rid of SWA (dream all you want legacy dudes, they aren't going away).

If and when oil approaches $200/bl then no one is safe, but the bottom line is you have to price your product to cover your costs and that will keep alot of folks from flying.

 

[skypine69]

Multi colored fish wrap. no one gives a $hit what usa today says about anything.

 

[RockyMnt1]

Businesses - conference/video calls instead of travel will be the order of the day. Already is where I work and has been for over a year. It takes a VP approval to travel for business.

Leisure travel - folks will be searching for things to do closer to home that doesn't involve airplanes. Combine the high cost with the wonderful customer service and delightful TSA process and it won't take much to convince folks to spend their hard earned and scarce money elsewhere.

 

[reepicheep]

The airport crowd's gonna look a lot less like the mall and a lot more like the office. Or the country club.

 

[gutshotdraw]

USA Today=McPaper

Small, tasty morsels with no nutritional value whatsoever.

 

[whymeworry?]

dude,


Put the gun down. USA today= ken-n-barbie reading. Nobody really takes it seriously.

I remember when oil was $30 a barrel. USA today printed in big words that oil was going to retreat.
Now at $120/ bbl they report that it could go to $200-300.

I also remember after 9/11 when the nasdaq hit 777. The very next day USAToday printed the impending doom of the stockmarket (I think the dow was 6700 back then, down from 10,000+). Weren't they a little late to "predict" a market meltdown? The point is, their reporters are like parrots. No research, no checking into fact, just interviewing so-called "industry experts" and repeating what they are told.

Who do you think is feeding journalists the gloom-and-doom load factor scenario idea? Mgmt wants you to think loads will be dropping so that labor won't hold them to account. They figure we'll fall for this for another 18 months while they take yet another half billion dollars off the table in stock options and cash payouts.

Remember, Boyd's commentary last fall "Storm clouds on the horizon for Legacy managements." His point was that labor is back and it intends to get paid. He called on managements to begin a strategic shift in thinking if they intend to fight the inevitable labor onslaught. Well, within days they did. You can almost see the exact shift in thinking by mgmt timed with his weekly update at that period. Meanwhile, bookings are strong and every fare increase but one has stuck ever since.

People are going to continue to travel. And they will travel in ever-increasing loads. They will continue to pay up no matter the fare increase. Why? Well, first, look around you. They'll pay $8.00 in the terminal for a gourmet coffee that they don't really need just prior to boarding an aircraft (why get wired before a long flight? I never understood that?). They'll pay $1500 for the latest LCD TV set. They'll switch out their entire DVD collection and player just because Sony tells them Blueray is better. They'll update their kitechen with $15,000 in stainless appliances, 'cause everyone else did. They'll drive a brand new $40,000 Honda Odessey or $55,000 BMW, cause their neighbor has one. Just the same, they'll pay up to be in Miami, San Francisco or Zurich because... well, because it's their God-given right to travel, damnit.

The second reason is because airfares are just plain low anyway. In fact, excluding the fare hikes of '08, the fares are as low as they were 30 years ago. Everything has gone up. EVERYTHING... except air travel. It's our turn to start charging for the cost of doing business. In fact, even with the fare hikes, I have found a dozen markets where my airline is literally charging only the fuel cost for seats. The point is fares have a long way to go before they get too expensive. They are still quite cheap.

Airline mgmts beware. Just as you MUST pay for fuel. So to will you pay for pilots. The loan is due.
We ain't fallin' for this sht again.

 

[Metro752]

Anyone who can't manage to non-rev through the system at anytime has half a brain, and doesn't deserve the bennies in the first place. I'm glad so many people are such cowards, afraid to get stuck somewhere. You probably have the intestinal fortitude of a woman with the stomach flu.

 

[Lear70]

Anyone who can't manage to non-rev through the system at anytime has half a brain, and doesn't deserve the bennies in the first place. I'm glad so many people are such cowards, afraid to get stuck somewhere. You probably have the intestinal fortitude of a woman with the stomach flu.

ROFLMAO!! That's classic,,, and a bit true, although I never had the stomach much for non-revving when it's important (weddings, funerals, cruises that leave at a certain time, etc) without going a day or two in advance.

As far as who won't travel? I won't, for starters. Don't have non-rev bennies these days and we're thinking about a vacation, started looking around the July timeframe,,, and found exactly jack crap for airline fares, cruises, or hotels.

Granted, it's the middle of the summer travel season, but round-trip from BNA to South Florida to get on a cruise was running $150 a person last year. It's over $300 including taxes for this summer. No kidding.

Cruises are up, too. The August before last ('06) we took a 7-day cruise on RCL (don't ever do those, WAY too long to be on a boat), it was $450 a piece. Right now, I can't find a cruise for even 4 days under $400 bucks, even on Carnival (which sucks unless you're a college drunk), unless it's well into October.

Started looking at the islands: Cayman, Dominican Rep, or even Puerto Vallarta, OK hotel prices, but holy crap, airfares are over $830 a piece round-trip. Priced the same trip LAST summer on a Southwest/Spirit combo for $370 per person round-trip.

What does that mean? It means I'm likely driving the family 7 hours to Destin to take our vacation this summer, $60 per tank, 4 tanks of gas round-trip = $240 bucks, and use the other money to get a nice room on the beach at the Sheraton 4-Points Resort, some massages, and some local games with the kids and just relax.

Amusingly enough, Orlando is $301 on Delta, $320 on Southwest round-trip. So much for "low-cost-carrier = low-fare-carrier".

I'm not panicking (didn't say that anywhere if you'll read again), but I'm agreeing with the article that there's a cutoff price at which the leisure traveler simply won't take their vacation by air. They certainly reached mine for the summer...

 

[skypine69]

yeah but you are a pilot....normal people will continue to fly IMO. Pilots are afraid of the economy because all we read is the usa today.

 

[Pickle]

USA Today...... 1/2 the news at twice the price.

That is all I have to offer to this discussion.

Sad, I know........

 

[Lear70]

USA Today...... 1/2 the news at twice the price.

That is all I have to offer to this discussion.

Sad, I know........

Yeah, but 2 x free is still free...

yeah but you are a pilot....normal people will continue to fly IMO. Pilots are afraid of the economy because all we read is the usa today.

Maybe all YOU read is the USA today, I still get the online WSJ every morning, and it's basically saying the same thing, without the big, front-page hooplah.

Here's a hint: everyone is afraid of the economy. If you're not, you've either got your head buried in the sand, you're independently wealthy, or you're just too ignorant to know any better. We're in a recession, if you hadn't noticed, despite what the President keeps yapping about. If we're lucky, it won't turn into a depression... we'll see.

Incidentally, it's not about being a pilot or not. If you'd stop to think about it, ironically enough, being a pilot makes it EASIER for you to take a vacation. It's called "pass privileges" and, in today's increasing airline ticket price world, pilots (and other airline workers) actually have an easier time taking a vacation because they don't have to factor in the cost of air travel.

Was in the airline world for a decade and, having to budget for a vacation for the first time without pass privileges, I can unequivocally tell you that the above is true. The average American just doesn't have an extra $500-$2,000 to throw at airline tickets for their vacation; they're lucky to be making their mortgage payment (take a look at the Journal's numbers for defaults and foreclosure notices 1st quarter 08).

 

[GuinessGuy]

Lets all hope WhyMeWorry's view is "spot-on." Alot of truth in his post.

 

[Lear70]

Lets all hope WhyMeWorry's view is "spot-on." Alot of truth in his post.

Only insofar as there are still many routes that are priced below the cost of making it and that salaries need to come up and that the cost of that needs to be passed on.

Otherwise, every industry expert has been saying for a LONG time that we have major over-capacity: too many seats available in the system to charge a reasonable fare. Now, if you read quotes direct from the CEO's, they're saying higher gas prices will FORCE a reduction in capacity.

In other words, the airlines are going to start trimming down how many flights they run, starting with the unprofitable ones like WhyMeWorry was mentioning where they can't raise the prices; on other runs, they're going to raise the prices and see where people will stop flying.

The CEO's understand there's a breaking point, and I'm not so foolish as to believe I can run the airline better than most CEO's. I don't believe EVERY word they say, but when I see their words backed up by prices on Expedia and the airlines' own websites, well,,, let's just say I've been in this business long enough to understand the proof is in the pudding and not bury my head in the sand.

Not panic stations YET, but less capacity = less flying = less crews required. At some point, it will necessitate furloughs at some carriers; not all, but some. Many of you weren't around during the downturns of the 80's and 90's or were too young to be paying attention; these are the classic warning signs of how an aviation downturn starts. "All of this has happened before; all of this will happen again".

 

[skypine69]

I know we are in a recession. I am not worried about it because i have set my life to be basically recession proof. My mortgage is very low because I did not go out and buy the massive house that I could only afford if I got creative financing. I sold another house near the top of the market and put the money in the bank. If neither my wife or I could work we could last for over 3 years on just our savings alone. Both of us have cars that are paid for, no credit card debt, in fact no debt except for the mortgage every month. And yes I read other papers than the usa today...but many pilots dont. However, I still think people will continue to fly, probably not in the numbers we see today, but what is the point of running a biz if you sell you product at less than it costs to produce. I have very little sympathy for people that spend every dollar as soon as it hits their bank account. Kind of like our government....

 

[gutshotdraw]

I have very little sympathy for people that spend every dollar as soon as it hits their bank account. Kind of like our government....

If those people were like our government, they wouldn't just spend every dollar as soon as it hits their bank account. They would also: max out their credit card, re-mortgage their house, pickpocket their employer, and finally go across the street with a gun and hold up their neighbor....:smash: