Is the airline crisis of 2008 worse than the economic aftermath of September 11, 2001?
9/11 was a crisis of confidence in the safety of air travel. Airlines simply couldn't fill their planes. The 2008 crisis is far more serious. The psychological injury of 9/11 has since healed and empty planes and cheap gas has given way to very full planes and the most expensive gas in US history.
The crisis cuts even deeper now because access to new sources of revenue aren't available when planes are already full. Instead we see higher ticket prices or new fees on first bags
, second bags
, food, curb-side check-in and soon seatbelt usage
(snark). Eventually, the price of flying will become so prohibitively high that the bottom of the market may just fall out completely. The upper level of tolerance for ticket prices is not clear yet, but it will run out eventually, and when it does leisure travel is going to take a major hit, only further slowing the economy.
Just as 9/11 saw the retirement of 737-200s, 727s, 747-200s, DC-9s, 10s and L1011s, the crisis we find ourselves in today has 737 classics, the remaining DC-9s and soon MD-80s on the chopping block. Also, once the new generation of mid-size wide-body aircraft enter service at the end of next year, the older 767s will be retired.
So, as the fuel crisis for airlines only gets worse, the three options (the good, the bad and the ugly) merging, cutting capacity or declaring bankruptcy is the only way forward.
Struggling airlines invariably mean struggling manufacturers. Or does it?
The big four (Boeing, Airbus, Bombardier and Embraer) - B.A.B.E.
- consider it coined - all have huge backlogs to fall back on if orders dry up. However this crisis should give them all pause to ask themselves if their product lines are prepared for the painful market dynamics ahead. All would likely answer yes, but here's a few thoughts for the road ahead.
Read the complete post at http://www.flightglobal.com/blogs/flightblogger/2008/06/the-oil-drumbeat-and-the-babe.html
Fri, Jun 6 2008 11:50 PM
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