Air Industry in Crisis ?

[Bazza]

This makes for interesting reading.......



http://www.businessweek.com//globalbiz/con...h+air+show+2008

[jastheace]

it is going to be interesting times ahead, i think that alot of the smaller cheaper airlines are going to struggle, simply because the have few resources to spread the cost over, where other airlines like ANZ and such will weather the storm some waht better, i can see orders continuing as airlines want new aircraft to help the fuel economy of their fleets. i was thinking this morning, wouldn't be cheaper to re engine the older a/c's? if it can be done at all? the fuel prices will stabilize, new technology will develop and the airline industry will bounce back, may not be as big a bounce as some of the other times, but people will still fly. perhaps the big head honchos of the airlines should take a big pay cut!!!

just my ramblings

Jason

[Bazza]

You can bet the "Honchos" won't be taking any cuts, just lay off a couple of thousand workers like QANTAS.

[Charl]

QUOTE (Bazza @ Jul 20 2008, 12:01 PM) <{POST_SNAPBACK}>

You can bet the "Honchos" won't be taking any cuts, just lay off a couple of thousand workers like QANTAS.

Mmm 1,500 or so I heard, 22 planes mothballed...
'Course you have to wonder why the oil dudes in the Middle East don't do this more often, although I suppose every 30 years sees them right.
(See Dubai 2008 vs 1978)
You'll note Emirates and Etihad will continue to expand their fleet and market share, as everyone else downsizes while being screwed on fuel cost.
You do need to ride the same escalator to be immune...

[Kelburn]

In my view hydrogen is the way to go.
(well I don't really know but that is my opinion)

If I ever have a spare $50,000 I will buy an old cessna and convert it to work on hydrogen and try to fly it.
It may seem far fetched but who knows...

[victor_alpha_charlie]

QUOTE (Kelburn @ Jul 20 2008, 10:03 PM) <{POST_SNAPBACK}>

In my view hydrogen is the way to go.
(well I don't really know but that is my opinion)

If I ever have a spare $50,000 I will buy an old cessna and convert it to work on hydrogen and try to fly it.
It may seem far fetched but who knows...

Probably cost a bit more than that, but good idea. I'll come watch

[Kelburn]

Well it would take a few years (knowing the rate at which I work!)

[greaneyr]

I'm a classic 'armchair expert' on this subject. I've run my own airline on several occasions, successfully delivering thousands of passengers to their destination on FS2004 in appalling comfort with harsh descents, steep turns, late turns onto final, and often overspeed landings. My airlines have a great record of cleaning up debri after accidents... in fact, my pilots are so skilled that they manage to keep the aircraft in one piece even after a huge impact. So all this makes me the ideal person to make statements about the state of the global airline industry:

Look, why is the airline industry in crisis? Fuel prices have gone up for other businesses too, so how have they reacted? Raised their prices. If the cost of a material you need in order to do business has gone up, you simply have to pass that cost on to someone right? That someone is your customer.

If I book far enough in advance, I can fly from Palmerston North to Auckland for under $100. That's just silly. There's no other way to describe it. You couldn't DRIVE there for that amount anymore, and yet you'd have to take 6 hours to do it, AND provide the labour to drive the car all the way. Fly there and you do it in just over an hour and you don't have to lift a finger. I really think airlines are undervaluing what they do.

Biofuels, potential drops in oil price, improved fuel-efficiency of aircraft... They're all just hopes at the moment. If the model is such that an increase in the price of a commodity (oil) that is fundamental to this industry causes the entire industry to collapse, then I'd suggest someone needs to come up with a newer and more sustainable way of structuring pricing to ensure airlines DO stay around and can respond to fuel price increases. At the moment, it seems like the airlines are just sitting back watching the price of oil slowly screw the entire industry. I'm sure there's a lot more that could be done.

[Anthony]

I agree that they really do need to put prices up in some cases, but with the economic climate it is the way it is, people can't afford the luxuries.
For many, flying is one of those luxuries.
If prices went up too much then there would be less customers, especially in the low-end leisure market.
That's why it's important to find the balance between price and demand, and also why I think promotional tools like Grab A Seat are better for the company than lower fares across the board.

[greaneyr]

I guess the big difference between an airline and other industries also dependent on oil is that they (the others) don't 'have' to provide a service. The way the economy is at the moment, I'm sure a lot of the flights perhaps aren't as full as they could be, but the model is such that the flight still has to take place, full or otherwise. If they raised their prices too much, they'd be flying empty planes around the country. They would never 'not fly' a sector if it was empty because then the rest of the day's schedules would be out of sync.

In retail, for instance, stock that nobody wants to buy just sits on the shelf for one more day gathering dust. Within reason, it doesn't cost money to keep it there. I guess there lies the biggest difference airlines face from other areas.

If airlines were able to operate on a 'demand-driven' service, they wouldn't have this problem. An aircraft would just sit on the apron until enough passengers came along who wanted to fly on it, then it would depart. This idea would really suck and it would be totally impractical for anybody except children and those with far too much spare time, but as an example it would help reduce fixed costs associated with operating a sector. I do think someone with a better mind for business than I have could come up with a way in which an airline can operate that mitigates the problems airlines currently face.

[Anthony]

Yes that's very true.
I suppose you could try having a huge fleet and running it point to point rather than a smaller one using the hub and spoke method.
That would be expensive though and it wouldn't entirely change the issue.
A bit of a no win situation I guess.