Airline tickets will go be going up up up

[chipmaster]

Oil is up 88% for the year and 24% YTD

 

Northwest and Delta just wrote themselves down by > 10 billion.

Between the two they spent an additional billion dollars on fuel

 

UAL also posted losses citing the huge run up in fuel costs.

 

Current US domestic airline business model for the larger hub carriers is bankrupt. The upstarts with newer more fuel efficient planes, efficient routes are in a bit better shape. But if you look at Southwest one huge reason they squeak a profits was their fuel price hedging. THis will go only so far as fuel price continues to rise and their ability to hedge profitably will not work.

 

Airline ticket prices must go up as airlines need to make money domestically instead of relying on international flights to subsidize huge losess domestically.

 

As noted by one executive ( CEO of Delta! ) the airlines need to boost fares 20% just to breakeven.

http://www.businessweek.com/lifestyle/travelers_check/archives/2008/04/the_wake-up_ala.html?chan=top+news_top+news+index_businessweek+exclusives

 

Since airlines are a business whose purpose for existence is to be profitable things must change.

1) Trim flights to those routes with right frequency where demand can drive very high occupancy.

2) Park inefficient airplanes.

3) Raise prices

4) Squeeze the staff, make them all do more with less, layoffs, paycuts, benifits squeeze.

 

Results will be:

Fewer direct routes, fewere flights, higher prices and much more crowded airplanes.

 

There is a bright side, delays due to crowded airspace will soon be just a fond memory.

[pms4104]

I wonder if the top dogs in the executive suites have considered either forgoing their bonuses or deferring some of their huge compensation packages.

[ShedQueen77]

The tickets I bought a month ago (Delta) have gone up $150 pp since. I'm glad I bought when I did!

[fbgd]

The tickets I bought a month ago (Delta) have gone up $150 pp since. I'm glad I bought when I did!

 

There are 1,000,001 reasons why airline tickets go up in the course of a month. I'd say it is 99% likely that they are nothing to do with those circumstances outlined in the first post.

[Jeano222]

As I mentioned in another thread, yesterday my non-stop flights from DFW to orlando dropped from 387.00 to 219.00. This is for November. Airtran started it and American matched. Could it be that people are cutting back on vacations??

[JJPNYC]

Airline tickets are priced on supply & demand.

 

As the airline took away seat, supply declined which made demand higher.

 

Conversely, now demand is waning a bit and there might be more supply of seats over the next months.

[chipmaster]

There are 1,000,001 reasons why airline tickets go up in the course of a month. I'd say it is 99% likely that they are nothing to do with those circumstances outlined in the first post.

 

Short term people will show all sorts of evidence contrary to my claims with examples of ticket prices getting cheaper and perhaps plots of prices versus oil plot. Nothing is more expensive to an airline then an empty seat, so expect them short term to do anythign to fill ever seat. Then once they cancel that flight that discount ticket won't be worth the paper its printed on.

 

If anyone believes that airlines almost all of the domestic ones lost money had absolutely NOTHING to do with the price of the ticket they charge and the revenue they got from the plane they are clueless :rolleyes:

 

ANyone who really doesn't believe that ticket prices or the business model is need of change for airlines to continue to be in business are probably the same people who don't believe Social Security system doesn't have a problem.

[Jeano222]

Yowza Chipmaster, are you saying they sold my seats cheap and are going to cancel the flight??

[chipmaster]

Yowza Chipmaster, are you saying they sold my seats cheap and are going to cancel the flight??

 

Not trying to alarm anyone..

 

Look at it this way.

 

1) You are running a business near bankruptcy

2) You can book business months ahead and take payment for it and put it in your bank account. What will you do? Sell it at "good faith" price ;) and book as much revenue as you can into your bank. Makes your business more liquid and hopefully that cash keeps it afloat. You think they use your credit to pay for that fuel 9 months out? Or do they use it to pay the current credit / cash flow liabilities? :rolleyes:

 

Now what happens if your credit runs out.. and you have to shut down? I have no info on what happend or is going to happen to those who have reserved and paid for flights on Alitalia.

 

I'm not saying that is happening right now, but how many times of we heard of companies doing funny things when things are going rough?

 

Personally I would trust long-term bookings to the larger airlines. UA, Delta or others sure could go to bankruptcy but are so large they will somehow keep the bulk of their flights and routes going. Small outfits, Aloha is an example will be allowed to go belly up and leaver the smaller group of customes to scramble.