airline indusrty

[highflying]

Everyone seems to want to compare the low times of today with the low times of the early 90's. I was to young to know what was going on with the industry in the 90's so can someone tell me why times where bad back then? How much worse do you think the industry can get now. What would be the effect if United went under and then AA and Delta followed? At some point doesnt the gov. have to step up and say OK We cant just let the whole airline industry fall apart or can they??

 

[bobbysamd]

The "Good Old" Days

You are probably familiar with the events that have precipitated the current situation. But for the sake of this discussion I'll review a few.

A long period of economic expansion which fueled airline hiring. Airline hiring fuels aviation growth at the lower levels, which meant great business for flight schools because quite a few people started flying careers. Then, in 2000, a recession hit. I use 2000 because stocks started dropping that year. In 2001, 911, which, of course, started the war on terrorism. For all intents and purposes, we've been in wartime since 911. Hiring has about ground to a halt. George Bush will go to war with Iraq soon. The major airlines are in desperate financial straits.

The late '80s-early '90s were markedly similar. A period of economic expansion which fueled airline hiring, which meant great business for flight schools because many people started flying careers. (Sidebar: In 1987 Kit Darby started whistling his "pilot shortage" tune. He is whistling it to this day. Sorry, couldn't help it.). Then, in 1990, a recession hit. Iraq occupied Kuwait. Hiring ground to a halt. George Bush went to war with Iraq. Eastern and Pan Am went out of business, turning thousands of qualified pilots on the streets.

See the similarities? I went through the early '90s period. Those times were tough. Now is much worse.

I will not speculate if AA and Delta will go under and disappear, as did Pan Am and Eastern. But you can count on the airlines restructuring drastically. The majors as we know them could very well remake themselves into LCC form. They will operate fewer shorter routes themselves and use regional vendors to operate these routes. Regional flying will become a career to more and more pilots who had planned to use the regionals as stepping stones to the majors.

The government would take steps to minimize any loss of transportation capacity prompted by a major's failure. But it won't be what you're used to seeing.

 

[banned username 2]

1990 vs. 2001, 2002, 2003, 200........

Well,

Back in the very early 1990's we had the Gulf War and a pretty nasty recession. The Regionals didn't fly jets and people were paying $10,000 for their own training at these airlines to ride right seat in a Beech 1900 making $13,000 a year. Upgrade times were 3-6 years and no one was really hiring except a few of the Regionals (we called them "Commuter Airlines" back then).

Eastern, Pan Am and Braniff had recently gone under so there were plenty of high time pilots on the street. Hiring minimums at the Commuters were around 2000 total and 500 multi to be even slightly competitive... You had to have your ATP... The 1,200 hours you heard everyone talk about (135 mins) didn't matter, no one would look at you with that low time (except to CFI)...

As far as the government stepping in. I think the Gov't will let UAL go under. They proved that by denying UAL the ATSB loan guarantee. I think AA and DAL will dramatically downsize and you will see a growth of the LCC's like SWA, AirTran, JetBlue and ATA. I think the days of the 777 Capt. making $300k/yr and working 28 hours a month are done. You will see payscales similar to what JetBlue are paying, with similar benefits and work rules. Productivity must go up and pay will go down at the majors. Economics is coming into play here.

Fuel costs and mis-management are other big factors affecting the industry. These have caused the loss of billions of dollars and thousands of jobs. Management is grabbing at straws trying to come up with a quick fix, but it isn't working... Their business models are inherently flawed. The proof of this is companies like SWA are turning a profit (albeit a small profit) in the same economic environment that the likes of UAL are losing billions per year.

One factor we have now that wasn't near as prevalent back in the early 1990's is terrorism. Remember on 9/11 hundreds of millions of people watched on TV over and over the images of everyday airliners with everyday people being flown to their death, and killing thousands along with them. These images will stay with people forever. This along with the increased security and hassles at the airport are causing people to drive on the shorter trips that they used to fly on. Some people have chose to only fly when they absolutely have to... Some have chosen not to fly at all...

The airlines bread and butter was the business traveler. They don't make any money off of you paying $149 round trip to go see grandma. They made their money from the business traveler who would pay the huge last minute fares. With business down in this recession, and spending cuts, business travelers are not flying near as much as they used to. Also fractionals are much more prevalent than they were in the early 1990's. this has taken a lot of the business traveler business away from the airlines, probably permanently.

There are many factors that have put the industry in the state it is in. I guess you could say this is the "Perfect Storm" for the airline industry. As with any storm, this to shall pass... But also like any severe storm, don't expect the landscape to look the same as it did before the storm, for if you do, I think you will be very unpleasantly surprised.

Disclaimer: The above is merely the opinion of one person, it is not meant to place blame on any one group, factor or entity. The above ramblings were written on the fly, take them for what they are worth.

 

[BE90CPT]

I agree totally to both posts.

 

[Ty Webb]

Nice post, Falcon Capt.

I have to say, though, that when you mention LCC's, JB is the media sweetheart, but AirTran should be the one mentioned after SWA, after all, we are much larger than JB, have been doing it longer, are growing at over 20% per year, are serving 44 cities and are making money. As for ATA, well, they are not making money . . . . .

Also, I would not lump Delta in with UAL and AMR. Delta will grow from all of this, if the business comes back and/or one of the other carriers goes under. If neither of those things happen, then it, too, will be in the same boat, but they are currently growing, just doing it with their RJ's . . . . . and SKywests, and Chataqua's, etc.

 

[vschip]

"I have to say, though, that when you mention LCC's, JB is the media sweetheart"

I'd say the main reason, the NY media love their own...

 

[Publishers]

events

Both of the above posts reflect what is happening. I would only add that when you have single events like 911 and world events like a war, they change the cycles that would be natural supply demand economic influences.

The thing with these events is that they can require one day adjustment, not the slower pace of a recession or business cutback.

 

[banned username 2]

Nice post, Falcon Capt.

I have to say, though, that when you mention LCC's, JB is the media sweetheart, but AirTran should be the one mentioned after SWA, after all, we are much larger than JB, have been doing it longer, are growing at over 20% per year, are serving 44 cities and are making money. As for ATA, well, they are not making money . . . . .

Thanks Ty,

It was my own oversight, I meant to include AirTran in with the LCC's... I have corrected my original post...

I apologize...

Good Luck to all!

 

[Skank]

We actually control the media through our laptops. We merely write up any story we desire about ourselves, and then hack it into the AP wire service where is is picked up by all the major media operations. Occaisionally, we write something good about Southwest and Airtran to keep them off our tracks. No, seriously....we do!

 

[highflying]

airline Industry

Lets say that UAL goes under and AA lays off more. What do these pilots do? Would these pilots go back to being a first officer at a regional? I mean JB and SWA cant hire all of the pilots on the street?