Flight Blog

Oct 06 2009 The Truth is a Blunt Instrument BY adminTAGS Allegiant

 

For the past three days I’ve attended the annual Aviation Forecast Summit. It’s a good place to get a reality check. Fortunately, cruel reality is tempered by the lush, rolling hills of the Kentucky countryside––this year’s summit is in Lexington.

 

The summit is a meeting of minds from airlines, airports and airplane makers. And, oh yes, an aviation analyst or two. Here are some of the thoughts, observations and predictions I've heard at the summit that you might find interesting (in no particular order):

 

  • The business slide, experienced by most airlines, is starting to slow, if not reverse itself. This is good news for the airlines, bad news for you. Why? Because fares have no where to go but up. That’s because the recession forced airlines to cut back on the number of seats in the air. As the recession improves, and more people start to fly, the supply of seats will be small. That will give airlines “the traction” they need to raise fares.
  • What is an “environmentally sustainable alternative?”
  • 25% of all domestic U.S. flights “are driven directly, or indirectly, by international travel.”
  • In the near future you may not book fare on a particular airline––you’ll book fare with an “alliance”. See: oneworld, SkyTeam, and the Star Alliance. These alliances are groups of airlines that share resources (to you and me this means "code share"). The thinking goes like this: the individual airlines will become anonymous, “virtual airlines.” Only the alliances will matter. Airlines that are not part of an alliance will suffer.
  • Most airlines are currently selling seats below cost.
  • Kevin Knight, senior vice president of planning, with United Airlines, says when the airline started charging for checked bags, it experienced little customer pushback. Bottom line message: bags fees are here to stay.
0 Comment(s) | Add comment

Oct 01 2009 "Airline Recovery?" BY adminTAGS Airlines

 

The business press is abuzz the past couple of weeks with glowing predections that the airline slump is ending. Our advice: don't pay a lot of attention to it. The biz press (and its associated analyst) have a notoriously poor understanding of the aviation industry. But I digress...

 

Yesterday American Express Business Travel made this prediction:  "...pent up trip demand coupled with supply base changes are likely to cause rates to slightly increase in most travel categories by the end of 2010. Business class airfares in particular are expected to increase in line with reduced capacity and on-going business demand for international travel."

 

Translation: fares will go up next year.  That's a safe bet.  From the airline perspective, fares have been too low this year; their bleeding red ink.  We've seen several reports the past couple of weeks about the airlines raising their liquidity. They need the cash because they're bleeding it so fast. So, bottom line, fares really have no where to go but up.

0 Comment(s) | Add comment

 

Jason says:

 

"With all the cuts American Airlines have made over the years in STL, I would like to know what you think the issue(s) is. And what the airport could do to improve and possibly attract another airline to have a large presence located there?"

 

The most recent American cuts in St. Louis are due to the the recession and the resulting decline in airline revenue. But to really understand what's going on we need some historical perspective...

 

Remember the airline TWA? Before the American buy out of TWA, in April 2001, St. Louis was a major hub airport. It was one of three TWA hubs: Atlanta, New York Kennedy and St. Louis.

 

When American bought TWA St. Louis lost it’s major hub status. From our point-of-view, at least, that status transferred to Dallas/Ft. Worth International (DFW). Before 2001, TWA flew hundreds of Springfield customers every day to St. Louis to make connections. Now those Springfield customers fly American to DFW to make connections. Bottom line: American uses DFW as a major hub rather than St. Louis. That's a simple way of putting it, but from our point-of-view it's accurate. The buy out of TWA brought on a long and slow decline of air service in St. Louis that continues to this day.

 

You ask what this airport can do to regain St. Louis service? Very little. The connections most Springfield customers need to make are no longer available in St. Louis. They're to be found at DFW or elsewhere. In the final analysis, there simply isn't enough customer demand for an airline to currently justify a Springfield to St. Louis flight.

 

If you'd like to really dive into a business anaylis of what's going with American and St. Louis, check this out.

0 Comment(s) | Add comment

Sep 17 2009 Passenger Growth Continues! BY adminTAGS Misc.

 

Our August passenger numbers are in and the news is good: our total passenger count was up 13 percent, compared to the same month last year. For the year we’re up four percent. It’s our fourth consecutive month of positive growth and it comes at a time when many airports report negative growth numbers.

 

We began the year down 14 percent…now we’re up four percent…so for the year we’ve come 18 percent. It’s great news, but let’s ad some perspective. While our August 2009 numbers are certainly better than last year, they fall short of the three years before 2008. Take a look:

 

  • August 2009 total passengers: 73,499
  • August 2008 total passengers: 64,992
  • August 2007 total passengers: 76,859
  • August 2006 total passengers: 74,465
  • August 2005 total passengers: 79,866

This vividly illustrates just how bad it was last year at this time. And it shows that while we’re doing better, we’re still behind where we were two, three and four years ago (when the economy was doing better).

 

So, while things are good, we still have a lot of catching up to do. Or, to put it another way, the economy still has a lot of improving to do.

 

How is the economy doing? Most experts seem to agree it’s getting better. But be warned—there are still gale warnings out for the aviation industry….

 

Everyone in the industry expects a very weak 4th quarter. Delta reports that it expects yields will be down 11 to 14 percent in the quarter. Yield is one of the most important airline metrics: it’s the revenue generated per seat for each mile flown.

 

The International Air Transport Association says it expects the world’s airlines to lose $11 billion by the end of the year. The head of the organization says “the global economic storm may be abating…but airlines have not yet found safe harbor….”

 

Our aviation business consultant, the Boyd Group, thinks things may rebound in the 3rd quarter of next year. But with unemployment still going up we should expect air travel to continue being weak. As Michael Boyd puts it, “Employment is the foundation of air travel.”

 

Earlier this week the head of the Federal Reserve addressed the issue of employment. The New York Times reports Ben Bernanke as saying, ”The Recession is very likely over [but} it’s still going to feel like a very weak economy for some time, as many people will still find that their job security and their employment status is not what they wish it was…”

 

Yesterday the Springfield Business Journal reported the August employment numbers for Missouri: 9.5 percent. That compares to 9.3 percent in July.

 

Bottom line: don’t look for real improvement in the airline and airport industry until employment begins to rebound.

0 Comment(s) | Add comment

Sep 11 2009 Delta Shopping? BY adminTAGS Delta

 

News this morning that Delta Airlines "is in talks to invest in struggling Japan Airlines Corp and become its top shareholder..." Read the rest of the story from Reuters.

0 Comment(s) | Add comment