Crocodilian

Are Airlines Going Bankrupt Again?

Author writes: "it is obvious air fares are simply too low to support the on-going fixed and variable costs of one of this country’s most important business sectors."
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Um . . .head scratching . . . if the airlines aren't filling the seats with these cheap fares, how do you think they'd do with higher fares?

The problem with the airlines is not "cheap fares" -- its too much capacity.

Why is there excess capacity? For the same reason that there are too many condominiums in Las Vegas: far too much credit, on much too easy terms.

Domestic Air Travel: Lowest Since Post-9/11

On Feb 13 11:08 AM User 198978 wrote:
> In a rational world, air travel would be nationalized and regulated
> for the common good just like any other essential utility--Amtrak,
> mail delivery, potable tap water, electricity and basic phone service.
> That likely will come only once the industry is at the point of total
> collapse.

Oh dear god, you don't really mean that, do you?

Like Amtrak?

Nationalized transportation services are nightmares. The only adequate air carriers are the ones with no connection to the old regulated models . . . Southwest, Airtran, JetBlue, Ryan Air -- these are high efficiency providers of air transport service, that suck up no taxpayer dollars, and allocate resources based on economic logic.

Nationalize airline travel and you'd get . . . Alitalia

There's every reason for air transport to remain a private endeavor, perhaps with subsidies or fees to encourage/discourage certain routes of national importance, but that's it.

Domestic Air Travel: Lowest Since Post-9/11

On Feb 12 05:29 PM Jake Berzon wrote:

> The passenger revenue miles response to 9/11 looks typical of a short
> impulse response, while the current decline looks much more like
> a step function response. (Reasonably assuming that passenger revenue
> miles can be modeled as a function of the derivative of GDP over
> time.)

Gotta love a man who reads charts with an electrical engineer's eye.

Leave aside, for one moment, that the airline business is an existentially awful business, leave aside the mammoth reliance on the financial strength of now not-so-strong financing shops (eg GE) and you're left with a commodity.

This commodity will remain in some demand, and the question will remain: "Who can provide the commodity efficiently?" The answer in dining is "McDonalds" and the answer in travel is "Southwest" (though their fuel hedges will hurt them until they roll off).

The chart is nightmarish for those who are leveraged plays on the _growth_ in airline demand-- engine and airframe manufacturers and financers.