Carnage In the Skies
Posted in Economics, Travel on April 7th, 2008 by ДмитрийThree airlines dead in one week.
It’s definitely time for some industry rationalization. As a frequent flier, I am totally baffled why the cost of my tickets has not gone up by 30-40% since I started doing this transcontinental commute three years ago, whilst the cost of oil has gone up 100% in the same time.
Honestly, if I hear one more whiney airline executive say “we’re losing money because fuel prices are so high and passengers want cheap tickets”, I’m gonna riot. Of course we all want cheap flights. But want in one hand, shit in the other, and see which one fills up first. Isn’t that what the airlines should be saying? Why is it our fault that they refuse to bring their prices in line with their costs? Did any of them take a standard business accounting course (you “make” money when your income exceeds your expenses)?
I’m sure people all want cheap gas, too, but that isn’t stopping oil companies from charging what they need to to maintain their margins and fund investments. I could understand maybe a 3-4-month lag in ticket price increases as oil gets dearer (more or less, depending on how well-hedged the airline is), but why have prices been fairly stagnant for three years? The only thing I can think of is that the airlines are all trying really hard to look distressed so that the government will be less likely to block consolidation attempts, or maybe some of the more dire airlines are anticipating another bailout like they got in 2001.
I think the idea that a bail-out could happen if the industry takes a total nose-dive is what keeps all the airlines from genuinely competing. Ideally, the most fiscally-sound airline would be willing to take a temporary passenger-count hit and would raise prices first (maybe only on high-fuel-usage routes and long-hauls), letting the cut-rate airlines continue to lose money on their increased passenger load whilst the financially secure airline coasts along and stays fiscally sound. Assuming that there was no imminent bail-out, the loss-making airlines would have to follow suit and raise prices or go under. The problem right now is that the major carriers are all 100% convinced that Washington would never let any of them go under.
The airlines do not need another bail-out ever again. I would rather pay the price of my fare when I buy the ticket rather than with every tax payment I make.
In related news, my masochistic habit of expensively enclosing myself in one of the above-noted tin cans on a nearly-weekly basis seems to have resulted in a severe bug which pretty much wrecked my 4-day stint at home this past weekend. How much longer can I keep this up?