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Luxury Peanuts?

JipWiz

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Airline travel to become luxury good — analyst

September 25, 2008 1:55 PM ET




All Associated Press news
NEW YORK (AP) - High fuel prices are helping make airline travel a "mid-priced luxury good" and could help the carriers by prodding them into restructuring, an industry analyst says.
Stifel Nicolaus & Co. analyst Hunter K. Keay said Thursday that many airlines will be profitable in 2009 and all airlines he covers will be profitable the year after, assuming oil prices of $115 per barrel by 2010.
Keay said that U.S. airlines prudently responded to high fuel prices by aggressively cutting capacity, dropping marginal routes, and retiring older, fuel-guzzling planes without placing big orders for new ones.
The result, he said, has been better pricing power even though traffic growth as been modest or nonexistent. And there's room for growth in ancillary revenue, he said.
Keay said the recent decline in oil prices — to about $105 per barrel Thursday after peaking at $147 in July — has given airlines breathing room on the liquidity front. He also said it's unlikely capacity will return because of a lack of capital to fund new ventures, including startup airlines, and "a newfound discipline of surviving carriers."
"High fuel prices drive unprecedented discipline," he wrote in a note to clients. "We believe airlines are now more likely to pursue sustainable profitability at the expense of market share, unlike they have done in the past."
 

Amish RakeFight

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Flying has always been somewhat of a luxury even for the middle class. Most passengers don't fly that often per yr and so when it's time, they spend a good deal of money on the average airfare and the inevitable, residual travel expenses. These combined expenses make traveling a luxury one can only afford on limited occasions.
 
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