Airlines lost money in 2009, how can they be suprised?

[DMRick]

We fly often and what really makes it tough, is the time we have to be at the airport for security. Sure, I know the reasons why, but we had to be at the airport 3 hours early yesterday (2 hours early from Albany to NJ, but the plane was late in leaving, so I read a whole book sitting there), because we were flying internationally to the US on our way home. We had to be there at 6 am..however, customs didn't open til 7:15 (and there was no line), so why couldn't we have been there at 7? Of course everyone is trying to bring the limit in carryons (and many are forgetting that liquids can't go on carryons, so that holds everyone up), so they don't have to pay for luggage, and we're seeing more and more items gate checked, because there just isn't room in the overheads and by people's feet. Some of those bags are just huge. And lately we are spending more and more time on the runway...what's up with that? Then, because flights to Albany from NY/NJ are far and few between, it was another 4 hours at NJ, waiting to get to Albany...and another half an hour wait on the runway.

Southwest is certainly our favorite for most domestic flights (although sometimes they are smaller airports which make the car rentals highter and farther from the city than we want to be), but we have found that if our SW flight is going anywhere near Philly, it's likely to be late coming to the airport we are flying from (although if we were more willing to leave Orlando on a very early flight, that would be less likely to happen, but we hate to lose so much of a day, when we could be in warm Florida). While it's been good for getting credits for taking willing bumps, it's hard on those coming to pick us up from the airport.

I'm certainly not finding flying anywere as much fun as I used to. We really enjoy cruising (including transatlantic) where we take a bus to the port, and get right on. It takes us less time to go from Albany to NYC via shuttle or bus, than it does to fly when you figure in waiting times. Our flight via SW Alb to MCO in a few weeks has us arriving to catch our flight at the airport before it's open (if we get there 1 1/2 to 2 hours early). I hope they don't mean that.

That said, other than all the time wasted waiting to fly, the actual flying experience has been good, on all the airlines, including the food. This trip Continental actually got us to our connection on time (not when we were supposed to, so it was a rush, but we made it). First time since 5 flights ago. We were able to go to Ireland direct, like planned, rather than France or London first!

 

[taitai]

The problem is not that the airlines are too expensive, it is that they are too cheap. They can't make money on the low fares they are selling. However, since deregulation, the number of airlines has exploded so, in order to attract passengers to competitive routes, they have slashed their prices to a point at which they can't make money. It is no wonder they are charging for every little thing. It is the only way they have a chance of breaking even.

It is interesting that you think twice about taking a vacation by plane due to the cost of airfare. When I grew up, taking a family vacation by plane was never an option. Maybe only once or twice my entire childhood and I grew up in an upper middle class family with adventurous parents. Now, with flights so cheap, we take our three kids everywhere by plane. My three little boys were on 16 flights last year and that was a really slow year for us due to an illness in the family.

Also, it is the price-insensitive business traveler that makes the money for the airlines and that is the group to which the airline caters. Not the leisure traveler who books maybe one flight a year. The business travelers with their elite status don't generally pay all the excess fees or, if they do, they pass them off to the company. However, with the rise of telecommuting options and the sluggish economy, even those people are not traveling.

I would hate to be an airline exec in this economy. You simply cannot win.

 

[eliza61]

I know the rates forced me to rethink travel quite a few times, and judging by their numbers I am not alone. My price point for airfare is $200 pp, including taxes, fees luggage and anything else they want to throw in there. Call it what they want but once the grand total reads over $800 for my family of 4 I cancel and think local. What does everyone else think about it, I'm curious?


From Beritbart
Airlines suffered record drop in traffic in 2009: IATA
Jan 27 05:19 AM US/Eastern


International airlines suffered their biggest decline in traffic since 1945 last year as passenger demand fell 3.5 percent, the International Air Transport Association said Wednesday.

My first response was "who didn't lose money last year. "

of course my pet peeve is also luggage fees but as I have said before traveling with me is like traveling on Cleopatras barge.

Taitai, is absolutely right though. Airlines are in a no win situation. We are so use to the uber low fares that there is no way they can make money especially with labor and fuel cost rising.

My problem of course is that I cannot limit my self or my family to seeing the world within a 16 hour radius. There is simply too much of the world we want to explore to limit ourselves that way.

I'm lucky that I live in the middle of 3 major airports (Newark, Kennedy and Philly international) so I can shop around for the best prices.

This summer it's off to Paris and I got a flight on Icelandic (of all airlines) rt for under $800 bucks. My first bag is free so thats pretty good.

 

[bavaria]

I agree with taitai and eliza. $200 is far underpriced and does not cover the cost of a round trip on the vast majority of routes.

Airfare in the US is cheaper than it was 20 years ago, and continues to decline, but the attitudes here about the 'high cost' of airfare continue to astound me.

ONLY is the US are mainline carriers pricing fares so far below cost, and dropping fares, and losing billions, and still having so many passengers whinge about how the fares are 'too high'.

Price out a fare on the Canadian board, or the UK board, and compare the cost per mile to a US fare. Taxes are also very low in the US compared to the rest of the world.

Airlines had to implement the baggage fees in America because so much of the American public refuses to pay a viable fare, and they have to try and stem their losses somehow. This website is a classic example of the challenge which US carriers have faced in recent years - fares are at an all time low and not viable, yet passengers want even lower fares, and demand better service.

You cannot have it all.

 

[bavaria]

As an example, on another thread someone is expecting to pay $151 round trip from MN to MCO.

That is completely unrealistic to think that the airline can make any money on such a fare.

 

[bavaria]

And yet, just across the northern border, where fares are at least 2x to 3x or more than in America, the largest carrier turned a net profit last quarter.

Air Canada Posts Net Profit, Sees Recovery Signs

http://news.airwise.com/story/view/1264631383.html

Air Canada reported a quarterly net profit on Friday and said it sees signs the bottom of the recession has passed it does not expect a full recovery for another 12 to 18 months.

The country's biggest airline said its results continue to be bruised by economic weakness and declines in passenger and cargo revenue, but conditions are no longer deteriorating.

"The worst of the worst seems to be behind us," chief executive Calin Rovinescu said. "Sprouts of green are coming up from the earth."

Air Canada said its cautious outlook reflects the company's reliance on premium, business-class travel over leisure travel to drive revenue.

Premium cabin yield sank nearly 20 percent in the third quarter from the same period in 2008 on waning corporate demand, while economy cabin yield fell 10.4 percent.

"An airline that is more reliant on business travel will take a longer time in the cycle to recovery," Rovinescu said. "When we talk about 12 to 18 months, we are looking at a cycle of recovery for the corporate customers."

The Montreal-based company said it still faces an "extremely challenging environment", but a cash balance of close to CAD$1.5 billion (USD$1.4 billion) gives it the financial flexibility needed to mitigate the effects of a weak economy

 

[bicker]

The problem is not that the airlines are too expensive, it is that they are too cheap. They can't make money on the low fares they are selling.

This.

 

[Disney Doll]

I know I'm probably nuts, but I would rather pay a little more for my airfare than get nickel and dimed to death for luggage, headsets, snacks other than a bag of dried out peanuts. I hate that now we are stuffed into airplanes with people with a million carry ons...how they get through with more than the 1 carry on and 1 "personal" bag is beyong me but I just went to MCO a couple fo weeks ago and people were coming on with a rolling suitcase, a laptop bag, a purse and a plastic Disney bag...hello! That's 4 bags.

Charge me $250 to fly to Florida, let DH & I have one checked bag and 2 carryons each, give me a cheap headset, a drink and a decent snack and I'll be happy.

 

[bavaria]

http://disboards.com/showthread.php?t=2383123

This thread is a classic DIS example of customer perception of prices, and a lack of understanding of supply and demand and pricing structures.

 

[Golf4food]

Treat the passengers better (like SW does) and fares would not be as big an issue. Most people will pay for better quality (to an extent). The fact that most major airlines see most passengers as little more than cattle is a bigger problem than the fares.

The world has changed and most airlines failed to change with it, just like GMAC and other auto companies failed to change with it and now all are suffering because of that narrow sighted focus. Technology and environmental awareness make web conferencing much more popular now than it was even five years ago, so of course the bread and butter business flights are down. Airlines should contract accordingly - yes, that means layoffs, fewer flights, more streamlined opperations, and higher fares. That's business.

Ford had to lay people off, contract a little, change their fuel economy standards, and offer more hybrids and higher MPG vehicles, all with better reliability, but they did it and now are the strongest of the American auto companies and actually turned a small profit in 2009 and are much better positioned for 2010 than the other domestic manufacturers. Sometimes growth hurts. The big airlines should do more growing and adapting.

 

[bavaria]

I haven't been treated badly by carriers in general, and I flew over 200,000 miles in 2009 over at least a dozen carriers. I didn't have status on many of those carriers either.

I said on another thread that it appears to be the fad in America (or at least on this website) to bash airlines in general, but that customers fail to look at themselves and how they have unreasonable expectations.

Of course there was 'better service' back in the 1970's and in the days before deregulation.

But the fares were also about 10x the fares that many people here are willing to pay.

 

[bavaria]

The big airlines should do more growing and adapting.

They did.

They cut capacity. They changed routes. They merged. They introduced a pay for service model.

They are trying. The reality is though that fares in America were so underpriced for so long that they have a very long way to go to raise fares to a viable level.

If they are not successful with raising fares, then they had to cut costs or increase revenue through incidental charges.

 

[bicker]

Most people will pay for better quality (to an extent).

Which is the same as saying that people won't pay for better quality. They won't. The typical consumer cares first and foremost about price, and our consumer marketplace is such that it can readily be directed into the never-ending death spiral that we see the airline industry in.

The problem is consumers and their maniacal passion for low prices -- the companies just have no choice but to follow them along, down into the abyss. Not every consumer is like this, and if you're not, then good for you! However, the marketplace has to deal with the fact that you're relatively unique.

 

[Mickeyistheman]

I am a travel agent and was laid off all of last year. Finally back in the working place and very happy. We are very busy!

But it does surprise me at how many people get their nose out of joint when I give them an airfare from Newark to San Diego for $330 non stop on Continental. She said oh my goodness its so expensive. I composed myself because on the inside I was fuming.

She is going Presidents week, THE most expensive week to travel during the year and was upset about this fare. I explained that it was VERY CHEAP and usually that fare is about $500 bucks!

I also agree with Disney Doll, that if the service was better on the flights itself, people would pay more and not blink an eye.

Unemployment and the economy is truly one of the biggest issues at the moment.

But when the pilots go on strike because they dont' feel they are getting paid enough everyone gets upset. These pilots and flight attendants don't get paid as much as you might think.

 

[bavaria]

And if another US carrier goes under, it will be devastating in terms of job loss, but will also most likely result in higher fares on other carriers as capacity is reduced.

 

[LuvOrlando]

The reason why upstarts do so well is that they are not so top heavy. All these big co's are the same, first there is a good idea. The idea then grows and grows to the benefit of all. But eventually the goal is no longer growing the business, the goal is how much can they get out of the customers while putting as little back in as possible. Sooner or later they want to be paid more for less in return. The customers see it and go with a competitor who is more willing to bend to accommodate the customer. In a free market this see-saw effect keeps everyone in line, but once an industry gets support to keep making bad business decisions the small changes never set off alarms and the whole mess comes crashing down.

How many industries need to do this before someone wakes up and lets the laws of S & D do their thing?

If it's too expensive then they need to figure out how to reduce costs. Travel is usually part of a luxury decision, and luxuries are dependent upon disposable income. No matter what the Co does unless they can put money in the customer's pockets they are dependent upon that customer's price point. For most families that point hovers at around $200 which puts the whole trip at or under $2,000 and I think about $1200 for food and a hotel is fairly acceptable to most families give or take a bit, some will drive and some will fly. The airlines will either have to meet that price of get crushed by families and business going with alternatives. I didn't make the rules, I'm just observing them and they seem pretty clear cut to me.

 

[Mickeyistheman]

Which is the same as saying that people won't pay for better quality. They won't. The typical consumer cares first and foremost about price, and our consumer marketplace is such that it can readily be directed into the never-ending death spiral that we see the airline industry in.

The problem is consumers and their maniacal passion for low prices -- the companies just have no choice but to follow them along, down into the abyss. Not every consumer is like this, and if you're not, then good for you! However, the marketplace has to deal with the fact that you're relatively unique.

I have to very strongly disagree with you on this one. When it comes to spending this type of money, I do feel that it comes down to quality instead of quantity.

I had to fly last minute down to Orlando for a wedding in Disney about 2 weeks ago. Spirit was the least expensive, instead of paying $50 more for a bigger seat, we got to sit with our knees in our chest for 2 and half hours. I will NEVER EVER EVER do that again. I will pay that money to have more leg room. I am 5'11 and I had bruises on my knees. Very unpleasant. I think even though people want cheap....they don't....they want something nice but cheap. Sorry you truly get what you pay for, if you want cheap then you will get cheap but its not REALLY what the consumer wants.

 

[bicker]

The reasons why upstarts do so well is that they don't have loads of pilots with 25 years of seniority. The arrangements that the unions are willing to go to the mat to protect, readily willing to drive their employer out of existence rather than compromise on, are the major source of uncontrollable costs affecting the industry. The way to reduce costs is for the government to let airlines go bankrupt, and then take the union contract and rip them up, forcing the employees to accept market wages and benefits if they want to keep their jobs.

 

[bavaria]

And $200 on most routes doesn't even cover the cost of flying that passenger.

I said on another thread that this website is just a very small portion of the mostly American population. Many people who read here don't travel much other than to MCO, and may have a very skewed sense of what constitutes a realistic airfare.

Fares to MCO were long some of the lowest in America, and rental car rates at MCO were the lowest in the world. When capacity was cut, fares increased a little (although they seem to be back down to pre-2009 levels quite often).

But people who only read this as their travel site, and who don't fly very often, may have the very big misperception that $200 is a realistic fare.

It simply isn't. The vast majority of flyers are paying more than that, because they don't have flexibility, don't book far in advance, don't obsessively hunt for the rock bottom fare, etc.

Without a broader base of comparison other than this website, I can understand why someone may think that $200 was 'reasonable'. But it isn't even viable.

 

[bicker]

Which is the same as saying that people won't pay for better quality. They won't. The typical consumer cares first and foremost about price, and our consumer marketplace is such that it can readily be directed into the never-ending death spiral that we see the airline industry in.

The problem is consumers and their maniacal passion for low prices -- the companies just have no choice but to follow them along, down into the abyss. Not every consumer is like this, and if you're not, then good for you! However, the marketplace has to deal with the fact that you're relatively unique.

I have to very strongly disagree with you on this one. When it comes to spending this type of money, I do feel that it comes down to quality instead of quantity.

You misread what I wrote. I didn't say anything about you. You are just one consumer, and your preferences are admirable, but not indicative of everyone.