Thursday, January 22, 2009

The Mystery of the Airline Industry

So, when fuel prices were sky-high, the airlines complained about pressure on price and profit, they got rid of meals and made us pay for blankets and pillows, and they added fuel surcharges. They were not profitable.

So now fuel is less than half of what it was, prices have been much slower to fall, and...yet again...they are not profitable. So what does this tell you?

We have too many airlines. There is too much supply in this market and someone has to go. They keep merging with each other, but I don't think that helps the supply issue, as they rarely merge with another airline in which they heavily compete on routes.

I don't own any airline stock, and I don't recommend you do either. Well, maybe Southwest....

3 comments:

staback said...

I believe that Southwest will be taking it on the chin soon. I thought I read somewhere that they locked fuel prices in long ago but it expires in 2009?

Gigs said...

Capacity is an issue. Used to be any mavrick with friends at a bank could get a fleet in the air. Those days are over. So too then are the days of cheap flights. When it costs more to take a car to the airport than it does to hop Jet Blue flight from NY to FL people should realize the are taking something for granted... the people who invested in the companies thinking they would ever be sustainably profitable. Isn't it also colorful that a 5hr flight LA-NY cost $600 for business while the same length flight NY-London $1,800? This business is about as investable as Amtrak.

Mudge said...

I was sad when Hooters Airlines went bust. Pun intended.

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