$100 oil – now the airlines are out of wiggle-room

All over the world TV newsrooms have got pre-recorded packages set to run as soon as oil hits $100 per barrel – and you can be sure they all include lurid stuff on airlines. I think this time the broadcasters have got it right – putting aside the psychological shock of hitting a hundred bucks, the airlines really are starting to run out of options. And fares are on their way up.The reason is that now even the lo-cos are struggling. What’s been happening for the past decade or so is that the mainline carriers haven’t been able to do much about fares because whenever they did the lo-cos took chunks of market share. It’s also been impossible to do what’s really needed and cut capacity. But the easy pickings for Easyjet, Jetblue, Airtran and the rest have mostly gone and they’re now in the real world of grown-up airlines.

So now you have airline CEOs all openly talking about raising fares and/or cutting capacity. United talking about grounding 100 aircraft (take it with a pinch of salt – but you get the idea); American talking up fare increases; Delta declaring that a new business model, no less, is needed (you don’t say). And so on.

There’s one caveat to all this: Ryanair in particular is still finding ways to extract more cash from passengers without necessarily actually changing fares. I think most other lo-cos are behind the curve on that, but they’re going to be catching up. Southwest are doing it by calling it a business fare and throwing in a couple of minor goodies; but on Zoom you can buy the exit row; and Easyjet charges for priority boarding.

I think a lot of people will pay for this stuff. If your ticket cost £11.99 or whatever, then another £5 for some legspace in the emergency row is not so bad. And my own guess (OK then, it’s what I’d do) is that people will be happy to pay a bit more to get a halfway decent meal. But the point is that if I’m right then the lo-cos will be able to keep fares down for a while yet which will keep the pressure up on the mainlines. However, time’s running out.

, , , , , , , , , ,

Leave a Reply