LCC's ON THE ROPES? According to Ray Neidl

[General Lee]

By Dena Aubin
NEW YORK, Oct 31 (Reuters) - Improved pricing will likely boost U.S. airline profits next year, but the next economic downturn may bring a return of bankruptcies and possibly liquidations, analysts at a distressed debt conference said on Tuesday.
Strong worldwide economies and healthy demand will allow airlines to raise ticket prices early in 2007, helping boost profits regardless of what happens to the price of oil, said Ray Neidl, senior airline analyst at Calyon Securities. "If that's the case, I do expect to see airlines do a lot of stock issues next year, particularly legacy carriers," said Neidl.


Prospects for older "legacy" carriers have improved as bankruptcies and fleet reductions reduced excess capacity and higher fares boosted profits.
"The low-cost carriers are the ones on the ropes now," Neidl said. "Their (business) models that worked beautifully when oil was at $20 or $30 a barrel do not really work too well with oil at $60," Neidl said at a Financial Research Associates (http://www.frallc.com) distressed debt conference.
Raising ticket prices is difficult for the low-cost carriers because consumers would switch to legacy carriers or curtail travel altogether, he said.
The fundamental problem is the airline industry has all the characteristics of a natural monopoly but cannot earn monopolistic profits because of competition, said Martin Fridson, chief executive of independent research business FridsonVision. "This an industry that has had 100 bankruptcies over the past 25 years," said Fridson. "They've been free to compete vigorously and they've gone broke regularly."


Bye Bye--General Lee

 

[Big Slick]

http://forums.flightinfo.com/showthread.php?t=74626&highlight=big+slick

Check out the date on this post.

 

[Kharma Police]

Ray Neidl? Anyone heard of him?

 

[MRYFLYER]

Ray Neidl? Anyone heard of him?

As a matter of fact, Yes. Many people have heard of Ray Niedl. While not always agreeing with him he is now backtracking many of the bad things he said about legacy carriers pre 9/11. Sorry if you are new to the industry and are not familar with the analyst.

 

[~~~^~~~]

The fundamental problem is the airline industry has all the characteristics of a natural monopoly but cannot earn monopolistic profits because of competition, said Martin Fridson, chief executive of independent research business FridsonVision. "This an industry that has had 100 bankruptcies over the past 25 years," said Fridson. "They've been free to compete vigorously and they've gone broke regularly."

Ain't that the truth.

 

[Kharma Police]

As a matter of fact, Yes. Many people have heard of Ray Niedl. While not always agreeing with him he is now backtracking many of the bad things he said about legacy carriers pre 9/11. Sorry if you are new to the industry and are not familar with the analyst.

Thanks, but I find it hard to believe that you find someone that you disagree with. Trick or Treat!!

 

[ReverseSensing]

Martin Fridson, chief executive of independent research business FridsonVision

Not to toot his own horn, or anything.

 

[brainhurts]

Ray Neidl puts his pants on one leg at a time, except when his pants are on, he makes gold records.

 

[Shrek]

Gotta have more COWBELL..............

 

[kngarthur]

Will someone send this story to Skybus?

 

[Eagle757shark]

So what does this all mean? So many tend to believe that consolidation is going to happen amongst the legacies. I believe as the legacies get back on their feet, there may be a few legacies and LCC joining together to better control pricing and market share. Many of the legacy carriers are positioning themselves with cash to possibly link up with a strong LCC. Just remember it is corporate business and nothing personal.

 

[FDJ2]

So many tend to believe that consolidation is going to happen amongst the legacies.

FWIW


From an interview with DAL's Whitehurst and Business Travel News

BTN: There has been a lot of talk in the industry about the inevitably of domestic airline consolidation. Do you anticipate such consolidation in the next couple of years?

Whitehurst: Over the next couple of years? Over the next century, I'm certain that there will be more consolidation. It's really going to depend on what happens in the economy. I don't see a lot happening really until the majors are all out of bankruptcy, so that's us and Northwest left to emerge.

The benefits are generally overrated and the costs are underrated, so it would have to be very compelling. I'm not sure that it will happen in this cycle. I certainly think it's far from inevitable. Stars have to align, both in Washington in terms of their openness to deal and where we stand relatively in the cycle and in terms of labor. I know a lot of people thought that somehow in this cycle it was going to force something to happen, but I generally think of consolidation happening at the low of the low and we clearly seem to be coming out of the low of the low of the cycle. I'm probably less optimistic that something happens than others. To be very clear, we are absolutely laser-focused on emerging stand-alone and so at this point we are not contemplating consolidating in the least.

 

[YourPilotFriend]

FWIW


From an interview with DAL's Whitehurst and Business Travel News

BTN: There has been a lot of talk in the industry about the inevitably of domestic airline consolidation. Do you anticipate such consolidation in the next couple of years?

Whitehurst: Over the next couple of years? Over the next century, I'm certain that there will be more consolidation. It's really going to depend on what happens in the economy. I don't see a lot happening really until the majors are all out of bankruptcy, so that's us and Northwest left to emerge.

The benefits are generally overrated and the costs are underrated, so it would have to be very compelling. I'm not sure that it will happen in this cycle. I certainly think it's far from inevitable. Stars have to align, both in Washington in terms of their openness to deal and where we stand relatively in the cycle and in terms of labor. I know a lot of people thought that somehow in this cycle it was going to force something to happen, but I generally think of consolidation happening at the low of the low and we clearly seem to be coming out of the low of the low of the cycle. I'm probably less optimistic that something happens than others. To be very clear, we are absolutely laser-focused on emerging stand-alone and so at this point we are not contemplating consolidating in the least.

They also said bankruptcy was highly unlikely.