Are airlines going to boost capacity?
Jun 6, 2010 | 6:49 pm
#1
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Are airlines going to boost capacity?
As we all likely have noticed, airfares are quite high this summer. This is a result of (1) airlines reducing capacity over the last two years due to an assumed brutal, long-term recession and (2) the recession not being quite as brutal nor long-term as was assumed. So now we have more fliers than expected seeking fewer seats.
Bloomberg today has an interesting article about this situation: http://www.bloomberg.com/apps/news?p...w1Ap48to&pos=6
So what will happen next? Opinions?
Bloomberg today has an interesting article about this situation: http://www.bloomberg.com/apps/news?p...w1Ap48to&pos=6
So what will happen next? Opinions?
Jun 6, 2010 | 7:57 pm
#3
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While I think they may add a bit of capacity (but not that much for a while) I don't see the prices coming down any time soon.
There's no need to lower the prices, they can fill the planes with the rates they have now and will only increase capacity if they can do so at current rates, which I don't think is very possible right now.
There's no need to lower the prices, they can fill the planes with the rates they have now and will only increase capacity if they can do so at current rates, which I don't think is very possible right now.
Jun 6, 2010 | 10:58 pm
#5
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I think the other piece of the puzzle is LCCs' ability to get financing to expand. That's a problem for most businesses today but generally more so the smaller the business is. Here we have a Fed lending at near 0% but banks not lending at anything close to that, and often not at all, even for creditworthy customers.
Whenever that finally breaks I think we'll see resumption of LCCs taking away market share from legacy airlines. Internationally the A380 also could be a game-changer whenever they finally get it into some real production. An airline like Air Asia X could turn it into a terrible cattle-car experience, but at much lower fares than we're seeing.
Whenever that finally breaks I think we'll see resumption of LCCs taking away market share from legacy airlines. Internationally the A380 also could be a game-changer whenever they finally get it into some real production. An airline like Air Asia X could turn it into a terrible cattle-car experience, but at much lower fares than we're seeing.
Jun 12, 2010 | 3:14 am
#7
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I think the other piece of the puzzle is LCCs' ability to get financing to expand. That's a problem for most businesses today but generally more so the smaller the business is. Here we have a Fed lending at near 0% but banks not lending at anything close to that, and often not at all, even for creditworthy customers.
Whenever that finally breaks I think we'll see resumption of LCCs taking away market share from legacy airlines. Internationally the A380 also could be a game-changer whenever they finally get it into some real production. An airline like Air Asia X could turn it into a terrible cattle-car experience, but at much lower fares than we're seeing.
Whenever that finally breaks I think we'll see resumption of LCCs taking away market share from legacy airlines. Internationally the A380 also could be a game-changer whenever they finally get it into some real production. An airline like Air Asia X could turn it into a terrible cattle-car experience, but at much lower fares than we're seeing.
Jun 12, 2010 | 6:18 pm
#8
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+1 Totally agree with the post above. The A380 will be game changing when production is ramped up. On the landside, another game changer for airports is air/rail capability. This will be especially game changing when the connecting train at the airport is high-speed rail and if the airline offers one ticket air/rail capability. Airlines should see this approach as expanding capacity and extending their market share through partnering.
Jun 12, 2010 | 9:09 pm
#9
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Its far more profitable to run fewer aircraft and higher fares/load factors, so if the airlines actually want to make money they should probably hold off on new capacity.
Jun 13, 2010 | 11:02 pm
#11
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OTOH, the pax demand according to recent statistics, is going up. Therefore, it's more profitable to expand the capacity on larger a/c, especially at capacity constrained airports and on mid to long haul sectors than to add another flight. Airlines also loose money flying routes that are 400 miles or less with mainline equipment so that's where airlines downsize capacity and adjust frequencies accordingly.
Jun 13, 2010 | 11:04 pm
#12
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OTOH, the pax demand according to recent statistics, is going up. Therefore, it's more profitable to expand the capacity on larger a/c, especially at capacity constrained airports and on mid to long haul sectors than to add another flight. Airlines also loose money flying routes that are 400 miles or less with mainline equipment so that's where airlines downsize capacity and adjust frequencies accordingly.