So much for "Seth, the Go-Fares Guy"... - RWM www.joepries.com wrote: >Hi Steve, >Having said that, there is still strong, very strong pricing power in select, monopolistic markets, Charlotte being one of them. My trip to AI2004 in July was $474 on USAirways (credit card miles covered 400 of it) while the guys coming from NYC paid around $200 and that fare was available on several carriers. This weekend's Boston trip- my ticket was $335 from CLT while Jose Prize paid $140 from FLL which is twice the distance to BOS. > >JP > > >Stephen Irwin <stepheni@xxxxxxxxx> wrote:What you're referring to Clay is 'elasticity of demand'. Airlines ability to >extract higher yields from available seat miles (ASM) has diminished greatly >with the proliferation of budget carriers and the perceived lack of value in >paying the premium the legacy carriers would have you pay. In short, people >see a large difference in price and very little difference in service. >Leisure travelers are much more price sensitive than business travelers but >even businesses now are becoming more price conscious in order to pare >travel costs and remain competitive in their respective industries. Because >there's so much capacity and a significant portion of it discretionary, it's >a buyers (passengers) market. Someone significant needs to go Chapter 7 to >take the pressure off the others. > >-----Original Message----- >From: The Airline List [mailto:AIRLINE@xxxxxxxxxxxxxxxxx] On Behalf Of Clay >Wardlow >Sent: Friday, October 29, 2004 11:57 AM >To: AIRLINE@xxxxxxxxxxxxxxxxx >Subject: Re: Everybody missed on this > >I understand and for the most part agree. > >Increasing fares though will not help. Average everyday Joes will not fly. >So, if people don't fly, airlines don't make money. With fares as low as >they've been, I've been able to fly quite a bit over the last 5 years. If >fares go up too much, I will only take one trip a year (rather than the 11 a >year I've been able to). > >That's all I'm saying. The problem isn't the fares. The problem is oil >prices. Fares are where they should be (for the most part) - fuel is not.=20 > >This is more than an industry problem. This is a world-wide problem. >Something has to be done or more than the airline industry is going to fall. >Look around you right now. Notice all the plastic around you. >Plastic is made from oil (petroleum). We've got a huge problem on our hands. > >Clay - SEA >Not a fan of oil companies and OPEC. > > >-----Original Message----- >From: David W. levine [mailto:dwl@xxxxxxxxx]=20 >Sent: Friday, October 29, 2004 9:10 AM >Subject: Re: Everybody missed on this > >At the moment, pretty much nobody in the industry can make money with >current yields and the current cost of oil. Southwest's benefits from >hedging were larger than their entire profit for the quarter. If WN had to >pay for the non hedged cost of their fuel, they'd have lost 22 million in >the third quarter. > >Hedging isn't a long term solution, in the face of persistent higher fuel >costs. >Hedges help you duck the risk of short term spikes (At the risk of having to >pay more for fuel if prices drop far enough) But you can only hedge as long >as people want to sell you hedges. If $40 oil becames the long term reality, >hedges below $40 will go away. > >My impression is that, at the moment, at somewhere between $40 and $50 a >barrel, the industry as a whole, including the low cost carriers can't make >money at current yields. Even carriers with very low seniority workforces, >minimal pension costs and all sorts of unsustainable sources of lower costs >start loosing money. That way lies madness. > >While there is no doubt that the legacy network carriers still have some >costs they can wring out of their systems. (It takes a long time to squeeze >out things which took decades to happen) there are limit. When Southwest, >which has pretty darn good practices only makes money with hedges, and >companies like AirTran and JetBlue aren't able to make money or are barely >making money, you're hitting a point where the industry as a whole, is >underpricing its product. > >A sustainable industry has to spin enough profit to pay for ongoing capital >investment. >A sustainable industry has to generate enough return that people want to >invest in it and are willing to hold debt and stock. And finally, a >sustainable industry needs to be able to pay people a decent wage, offer >them some benefits, including a pension, or it won't be able to attract >people with the skills and desire to do a good job. >That's especially cogent for pilots and mechanics, but in terms of customer >service it matters across the board. Southwest manages this, but at the >moment, they're going to have problems doing it, if oil stays where it is. > >- David > >At 10:54 AM 10/29/2004, you wrote: > > >>Clay, >>Since the oil went from $19 to $55 in almost a year, the fares didn't >> >> >raise > > >>the fares in a proportional way. This is hurting them big time. The >> >> >airlines > > >>did everything they could, including outsourcing some work, increasing >> >> >the > > >>utilization, laying off people and reducing the salaries of the people >> >> >who > > >>are still ungainfully unemployed. >>There isn't enough room to squeeze any more. >> >>So, this fare increase is long overdue if you ask me. Low low yields >> >> >with > > >>highest oil prices in the history is a combination of death for a lot >> >> >of > > >>airlines. >> >>All the majors, to a certain extend are leaner and meaner compared to >> >> >3-4 > > >>years ago. It's the oil price that's killing them. >> >>I read United's quarterly press release yesterday. They are paying $1.5 >>BILLION ( that's $1,500,000,000)!!! More for oil this year .. That's an >>outrages number. If it wasn't for this they would be reporting pretty >> >> >nice > > >>profits. >> >>BAHA >>Fan of Ua 747 upperdecks >> >>-----Original Message----- >>From: Clay Wardlow [mailto:clay.wardlow@xxxxxxxx] >>Sent: Thursday, October 28, 2004 9:28 AM >>To: Bahadir Acuner; AIRLINE@xxxxxxxxxxxxxxxxx >>Subject: RE: Everybody missed on this >> >>Fan of fare increases, are you crazy man? >> >>The airlines need to go through a much needed diet. There is so much >> >> >fat > > >>and waste at the biggies especially. This has been a long time coming. >> >>There's lots of change that needs to happen, not just in the aviation >>industry, but world-wide. Oil is getting more expensive. Demand is >> >> >going > > >>up, supply is going down. Now we know there are other sources of energy >>for cars (etc), and they are becoming more popular. Is there such a >>thing for airplanes? What happens to the industry if fuel prices never >>stop going up? Fares can only go up so much before the average person >>can't fly. That's not going to save the airlines. >> >>Clay - SEA >>Fan of the maglev train they talked about on the Discovery Channel the >>other day. >> >> >>-----Original Message----- >>From: Bahadir Acuner [mailto:bahadiracuner@xxxxxxxxx] >>Sent: Wednesday, October 27, 2004 7:08 AM >>Subject: Everybody missed on this >> >>WN has increased some of the fares by 50% few days ago. In the day and >>age of $55/barrel oil prices I am hoping that this will take care of >>yield problems in the industry. There will be less of $99 one way >>special fares. >> >>BAHA >>Fan of fare increases so that airlines can stay afloat. >> >>