Delta Offers Severance Packages

[Speedtape]

"These reductions will be achieved partly by taking 15 to 20 mainline aircraft and 20 to 25 regional jets temporarily out of service.


International business will grow and domestic capacity cuts will come out of point-to-point flying. No reductions will be seen in competitive markets,...

Texx,
Is this your alternate ego?

 

[Speedtape]

Won't help anymore if we continue down the recession path. People are spending less on things that arent priority to them or their families...like vacationing and traveling for example. So if you hike the prices way up to cover fuel cost then people just wont fly.

It want matter. As soon as $110 a barrel costs trickle down, raising the costs of everything you consume, there want be enough disposable income to drive to the airport, much less buy a ticket.

In addition, foreclosures are going to spike and the mortgage/banking industry will nosedive, further! The auto industry will follow, along with home construction. There will be more airline bankruptcies--straight to Chapter 7.

It will do wonders for nonreving--as long as there is an airline to non-rev on!

Raising ticket prices will not save the day in an inelastic market. Beyond a certain pricing point, the masses will quit flying. Fuel drives the economy; high fuel prices will destroy the economy.

And the good news is--Flightinfo, along with the Country Boy, will survive!

 

[Lyconit]

Raising ticket prices will not save the day in an inelastic market.

Just to clarify:
-An elastic market is where there will be a greater percentage decrease in demand with any percentage increase in price and total revenue will decrease. In other words, passenger demand is less responsive to price changes (think family of four going on vacation).
-An inelastic market is where there will be a lesser percentage decrease in demand with any percentage increase in price, resulting in an increase in total revenue. In other words, passenger demand is more responsive to price changes (think business guy who will spend any amount of money to get to a meeting in NYC).
-Trust me, Airline Management 101.

What you really meant is in an "elastic" market, but the flying public has proving you wrong anyway. They are willing to pay to fly and that's why load factors continue to stay very high even though prices are going up. That may change as the economy tanks, but I'm not an economist, but I am an educator.

 

[Speedtape]

Just to clarify:
-An elastic market is where there will be a greater percentage decrease in demand with any percentage increase in price and total revenue will decrease. In other words, passenger demand is less responsive to price changes (think family of four going on vacation).
-An inelastic market is where there will be a lesser percentage decrease in demand with any percentage increase in price, resulting in an increase in total revenue. In other words, passenger demand is more responsive to price changes (think business guy who will spend any amount of money to get to a meeting in NYC).
-Trust me, Airline Management 101.

What you really meant is in an "elastic" market, but the flying public has proving you wrong anyway. They are willing to pay to fly and that's why load factors continue to stay very high even though prices are going up. That may change as the economy tanks, but I'm not an economist, but I am an educator.

Thank you, you are absolutely correct! I was wrong on the use of the term in regard to demand. As you stated the correct term would have been elastic market. However, irregardless of my wrong useage, my desired message is the same.

For the bus company, the key is that demand is elastic. For example, suppose that the elasticity is 1.5. Then, if price is raised by 10%, quantity (ridership) must drop by 15%. But the drop in ridership more than offsets the increase in price, and so revenue will drop.

The above illustration explains my message. Simply apply the above to the airlines. If there were no other changes in the economy (increased gas prices) then prices could be raised slightly higher without a drop in ridership. However, the sustained spike in the cost of oil will cause disposable income to greatly diminish. This will have a compounding affect, and will reduce demand by itself. Please look at past oil crisis. Today, there is more demand (China and our own economy), CONTROLLED OIL PRODUCTION, insane Oil futures speculation, and resistance by the American public and government to embrace energy conservation (instead of a chicken in every pot, there is an SUV in every garage.)

Although airlines have done a good job of reducing and controlling capacity over the last few years, high load factors have not produced sustainable profits. As fares are raised, fuel costs continue to rise, disposable income is diminished, and ridership drops, there will be more airline bankruptcies--the Chapter 7 kind.

The reduction in disposable income and more job losses will be the major contributing factor to the further decline in the airline industry. Our industry no longer can count on just business travel (time sensitive customers), which will also decline. Today, our industry counts heavily on leisure travel customers (PRICE sensitive customers.) Our dependence on foreign oil (energy) will once again take a devastating toll on our economy. We are all about to get a good lesson in Economics 101--which trumps Airline Management 101!