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

[bavaria]

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.

But we are the exception; certainly on this website, and perhaps in the greater American flying realm to a certain degree.

I will gladly pay more for a more comfortable seat. I pay out of pocket to upgrade; I pay for preferable seats; I pay for seats with more legroom. Others don't see the value in that and choose not to (and then often complain about the lack of space!)

I often talk about considering value vs cost on the Transportation Board, but very few readers seem to understand the difference, or only care about cost.

 

[bavaria]

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.

Actually, what the airlines in America did in 2008 and 2009 was say goodbye to the average DIS flyer.

They cut capacity on routes to MCO because flying the average DISer was losing them money for every ticket they sold. They no longer wanted or needed those passengers because they were money losers. By cutting capacity they could try and raise fares to a more reasonable level, or focus on the profitable customer.

It wasn't anything personal, but many industries cut ties with their least profitable or money losing customers.

 

[Mickeyistheman]

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.

Oh I know you were not talking about me lol.

I just see it on a daily basis due to my line of work. I know consumers want the least expensive package or airfare out there, BUT what I meant was if they really stayed at that resort in Cancun that was the least expensive, it wasn't what they wanted. It's a double edged sword.

They say one thing but want another. I have someone who wants to travel with her family of 4 to Beaches in Turks and Caicos. It's not a cheap destination. She thinks that if she keeps spinning around the price will come down and it won't because it is a quality place.

I gave her something for her budget. I knew it was not what she wanted based on my conversations with her and her husband about how they travel. So that is what I meant by my comment.

 

[bicker]

They say one thing but want another.

Indeed. Buyers' remorse is rampant.

 

[SaraJayne]

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.

And then people will choose cheaper (and for a lot less hassle) transportation options, thus continuing the cycle of higher fares on airlines.

 

[bavaria]

And then the remaining carriers may actually turn a profit. See the article about Air Canada turning a profit which I linked earlier. There is one national mainline carrier in Canada, one semi-national low cost carrier, and a handful of regional carriers. This for a country larger than America in terms of land mass.

Yet the fares are 2-3x or more higher than the average 'DIS fare'.

 

[punkin]

Try booking a fare to London right now...the fees and taxes are higher than the actual fare. Go figure!

 

[KramBerries]

Airlines have tried several times in the past to add legroom. Doing so requires that they have fewer seats, so they have to charge more for each remaining seat. Every time they've tried, consumers have voted with their dollars for smaller seats. People complain about the tight spacing, but not that many people, when given the choice, are willing to pay the added cost.

Personally, I like that airlines are pricing things like baggage and meals separately. That and the competitive marketplace will help apportion costs where they should be. I wish that more things in life were price a la carte.

 

[SaraJayne]

And then the remaining carriers may actually turn a profit. See the article about Air Canada turning a profit which I linked earlier. There is one national mainline carrier in Canada, one semi-national low cost carrier, and a handful of regional carriers. This for a country larger than America in terms of land mass.

Yet the fares are 2-3x or more higher than the average 'DIS fare'.

They won't make a profit if people decide flying is too expensive and choose other options...and right now, many carriers are teetering right on the edge (especially since they recently upped the price of luggage to a ridiculous amount).

For some, the hassle and cost of flying isn't worth it. And people will only pay what they feel is a good value. If they weigh cost vs. perceived value/hassle, cost will win almost every time.

Fewer people flying = less profits.

 

[FireDancer]

I agree with you, flying used to be something that was special and not something that happened everyday. Most people couldn't afford it.

Most people also couldn't at one time afford a computer or a television. Things that were once luxury goods evolve into the mainstream over time. I still remember having one friend with high speed Internet.

There are a lot of efficiencies that could be had by the airlines. That is part of Southwest's success. They only fly 737s (though they do have 3 variants) so they don't have to stock parts for a large disparate fleet or have mechanics that have to know a variety of planes. They also use a point to point system instead of a hub and spoke which leads to more direct routing on many occasions.

Without examining the financial sheets of the companies I would guess that Southwest makes a profit but having a good grasp on their cost structure and not relying on increasing rates and adding on fees to balance the books (often unsuccessfully). I think the economy of scale for the Southwest model is better then the traditional model. This is just an educated guess though.

 

[taitai]

They won't make a profit if people decide flying is too expensive and choose other options...and right now, many carriers are teetering right on the edge (especially since they recently upped the price of luggage to a ridiculous amount).

For some, the hassle and cost of flying isn't worth it. And people will only pay what they feel is a good value. If they weigh cost vs. perceived value/hassle, cost will win almost every time.

Fewer people flying = less profits.

That actually isn't true. Fewer low fare paying customers will equal greater profits. However, the airlines don't make their money and don't build their model around the leisure traveler who maybe books one flight every year or every other year. If they did, every airline would have direct flights to Disney/Orlando on the hour. Rather, they make their money on high profit routes and business travelers. It is those travelers who the airlines cater to. They are their meal ticket. You rarely hear an elite flyer complain about customer service. They are catered to with lounges, and frequent flier miles and no fees and bigger seats, etc.

 

[eliza61]

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.

.

See I don't see that as true. We are now a Walmart country. As a rule we are a throw away society that wants things as cheap as humanely possible without thought to the consequences.

Look how we squawk when Disney dares to raise ticket prices 10cent.

It's why manufactures will make packaging smaller instead or raising the price.
The average leisure/vacation traveler would not pay pre 1970's prices no matter what amenities the airlines provided.

 

[bicker]

See I don't see that as true. We are now a Walmart country. As a rule we are a throw away society that wants things as cheap as humanely possible without thought to the consequences.

Look how we squawk when Disney dares to raise ticket prices 10cent.

It's why manufactures will make packaging smaller instead or raising the price.
The average leisure/vacation traveler would not pay pre 1970's prices no matter what amenities the airlines provided.

It is also why retailers source products from China, despite numerous instances showing that it is riskier to believe that products coming from there are safe, not to even consider whether they are quality products.

 

[brerrabbit]

Airlines have problems making money because we as a consuming public expect deals that are better and better while the airlines face uncertainty in their cost structure. Take jet fuel as an example. They sell seats on flights 6 to eight months out while they have no idea what fuel costs will be. They can hedge those costs but there again the hedges have costs and sometimes don't work to their advantage.

Going off topic for a second a statement from the article pointed to by the OP has me wondering about the global economy in a macro sense. It quaotes and industry association pointing to growth numbers and how so many gains were given back in the last couple of years. Our economy is based on the idea of never ending growth of all industry participants but the reality of the situation is constant growth as a goal in every economic segment is a totally unattainable goal. Things cost more money as time goes by for a variety of reasons, increased costs, increased demand etc. When politicians talk about getting out of our current recession the most common answer is we have to spend our way out of it, but the reality is that increased spending and the unwise borrowing needed to increase spending is what brought us to where we are today.

Sorry but that arguement of spending our way out of recessions has bothered me for quite a while. I totally understand the concept as I have both a BA and MBA in finance and understand the economics but from a rational standpoint question the answer.

Back to the airlines..........

 

[kaytieeldr]

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.

Try explaining it on a per-mile basis - very rough estimate of 3,000 miles in each direction = five and a half cents per mile. That's about 95% less than what the government feels it costs to drive a mile.

How much is her time worth? The flight is about five hours; the drive is about 42 hours. It's not worth $330 to her to have almost three additional days at her destination? I know you can't say any of this to her - but sheesh! Talk about feeling entitled!

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

And that amount is simply unrealistic. Travel - especially vacation travel - isn't a right. Sure, the airlines need passengers in order to garner revenue (not the same as making a profit, by the way). But to expect the airline to transport each passenger at a loss, simply because the passenger sets a price point, is unrealistic.

The airlines will either have to meet that price of get crushed by families and business going with alternatives

Conversely, the passenger will either have to meet the airline's (reasonable, given all its costs) rate for air travel, or find some other means of transportation, or reduce/eliminate trips. Businesses already have, with online meetings, teleconferencing, etc.

And then people will choose cheaper (and for a lot less hassle) transportation options, thus continuing the cycle of higher fares on airlines.

Ah, but I don't consider a forty-plus hour drive, or a three-and-a-half day train trip that arrives in the middle of the desert in the middle of the night, "less hassle". Nor, in all likelihood, is either cheaper than flying - especially when you factor in the value of one's time.

 

[LuvOrlando]

I find it improbable that anyone but the 1st class demographic and/or the business traveler who isn't footing the bill isn't moved by prices first. It's all about price, discount travelers like the discounts and premium travelers like the fact that the price means something is exclusive. Even when comfort comes into play people will adopt a tolerable range regarding a relative increase in price that corresponds with an increase in comfort or other incremental improvement in the good or service, such as I'd pay $50 for more leg room but probably not $500, now some people would but probably not the majority. I think it is perfectly reasonable for people to consider price first, since, after all, almost everyone's income is limited and every expenditure corresponds to an opportunity cost. For some people a more expensive flight may mean they are giving up a designer pair of shoes, other families might have to give up a second vacation during the year, and a third set might have to give up having meat for a month. Some will opt for the trade off and others won't.

Things have changed recently, sure the airlines could rely on the business flier to pay their bills pre 2009. But that's because big business was humming along with high profits and zero interest in keeping expenses low. For heavens sake, my DH's Co would routinely wait until the last minute to book him on an Int'l flight Business class for thousands of dollars more than if they'd booked sooner or looked for a competitive rate. Now it's all changed. The airlines have shot themselves in the foot and hurt their meal tickets. The only one's left with money are the leisure travelers and if they can't make it work for us I guess they'll be in a whole lot of trouble soon enough. The thing they need to realize is there is always a way around travel. Co's can just hire employees closer to the job or use video conferencing and leisure travelers can always just vacation within driving distance from home. I'm in PA and could easily drive to Cedar Point, Hershey, Dorney Park or Great Adventure or even spend time at the NJ shore or Cape Cod, none of which require me to fly. As it so happens we will be flying to 2 places this year, one WDW trip and one Int'l trip... but I had a price point for those trips and since my Demand price was met we're going but believe me, it was touch and go there for a while with the prices.

The thing is, when you're in a disposable income industry you are at the mercy of the consumer.

 

[mickilee]

i drive over the border to Buffalo every 2 or 3 months to see DBf. The fares are so much cheaper.
504 from Toronto
170 from Buffalo to Minneapolis.

then figure in the parking at Toronto Pearson
89 at cheap lot
48 at Buffalo airport

last trip was almost 700 from Toronto
this trip under 200 with luggage paid..

 

[bavaria]

It is absolutely NOT all about cost, even here in DISworld. I posted a poll last year and things like route, number of stops, aircraft, comfort, interline agreements, alliance, ability to react in case of irregular ops all were considerations ahead of cost.

It is also naive to think that business travellers have unlimited budgets, or a lack of fiscal responsibility. For those who have discretionary spending, if the airfare is too high, they may not be approved to attend the meeting or conference. For those who need to get to their destination ASAP, cost is still a consideration. I have often flown at 0 days notice, but still consider the cost of the trip and adjust my routing and carrier accordingly.

 

[bavaria]

They won't make a profit if people decide flying is too expensive and choose other options...and right now, many carriers are teetering right on the edge (especially since they recently upped the price of luggage to a ridiculous amount).

But in America there is often no other viable form of transportation. There is no high speed rail network other than a short stretch here and there; the remaining rail network is very poor; the interstate system cannot handle the current traffic let alone increased traffic.

Decades of transportation policy have resulted in a system where flying is for many the only viable option. Driving for days just isn't something that everyone considers viable.

In the rest of the world there isn't this sense of entitlement that people deserve low airfare and deserve low cost vacations. People save up for their vacations, and if they cannot afford it, they don't go, or choose an alternate destination, or only fly every few years or so.

And I do think that this website doesn't represent the greater American psyche. I don't read this type of whinging or sense of entitlement on other travel websites that I visit, including a few Disney ones.

 

[FireDancer]

But in America there is often no other viable form of transportation. There is no high speed rail network other than a short stretch here and there; the remaining rail network is very poor; the interstate system cannot handle the current traffic let alone increased traffic.

Decades of transportation policy have resulted in a system where flying is for many the only viable option. Driving for days just isn't something that everyone considers viable.

In the rest of the world there isn't this sense of entitlement that people deserve low airfare and deserve low cost vacations. People save up for their vacations, and if they cannot afford it, they don't go, or choose an alternate destination, or only fly every few years or so.

And I do think that this website doesn't represent the greater American psyche. I don't read this type of whinging or sense of entitlement on other travel websites that I visit, including a few Disney ones.

In Europe there are also low cost carriers like RyanAir and they get fares even cheaper then ours so I guess price is important for them as well. I do wish we had a decent rail network here which would put some more competitive pressure on the airlines.

We have stopped almost all business travel because of the cost. We spent some money up front to install some Cisco video conference equipment and have cut our travel to practically nothing. That is another form of competition for the airlines in the business sector. The last straw for us was the baggage fees. The dishonesty of claiming they were to recoup the losses for fuel yet not discontinuing them when the fuel price came back down.

We have already made back our entire investment in the equipment and it has been just about a year.