Airlines Return To Profitability

NPR ^ | 07/22/2010 | Wendy Kaufman

[SeekAndFind]

The U.S. airline industry is rebounding. For the sixth consecutive month, carriers brought in more money than they did last year.

"We are seeing some light at the end of the tunnel," says Dave Castelveter of the Air Transport Association, an industry trade group. "You know we have been faced with challenges like none other."

The industry was clobbered after the Sept. 11, 2001, attacks. Then the global economy soured, and people stopped traveling. Fuel prices climbed to record levels.

In response, the airlines had to cut costs. They reduced the number of flights and slashed their payrolls. They began adding fees for things like food and luggage. Some airlines, like Delta and Northwest, even merged.

Passengers are now paying about 20 percent more for airplane tickets than they paid a year ago. And the number of passengers -– especially business travelers — who often pay higher fares is increasing.

Industry analyst Richard Aboulafia of the Teal Group says that with the demand for tickets quite strong, the airlines are in the driver's seat.

"The one thing you want … when numbers come roaring back as they are now is that seats are at a premium because you've cut so many of them," he says, "and therefore you have more pricing power and your profits go up."

This week, Delta Air Lines reported its largest quarterly profit in more than a decade. United and US Airways posted their first profits since 2007.

Some airlines are now beginning to order new planes and rehire workers. But, Aboulafia says, airlines will be very careful not to add too many new flights too quickly.

"They're going to be pretty reluctant to add a whole lot of capacity," he says. "That means that things are only going to get a little tighter for the consumer, a little more expensive."

So travelers may have to book early and shop more carefully.

[2nd Bn, 11th Mar]

FWIW, Delta lost me as a customer when they cut way back on their flights. And I was a Silver FF at one time.

[Ramius]

LOL. I fly fairly often, and I don’t recall ever being bullied by the TSA. No, I wasn’t in favor of creating the agency in the first place, but I haven’t found any problem dealing with them whatsoever. They’ve been professional and polite.

At least they speak english, with is better than what used to be there.

[kevao]

E-cig for me.

[Ramius]

yah. I’ve tried those. They work pretty well.

[Tolsti2]

I have to kind of laugh when you describe air travel in a way that hasn’t been around since the 40’s. Are you over 100?

[SBprone]

I read somewhere that the net profit earned by the commercial airline industry from its inception to date is about zero. I think it may have been Buffet or Munger who made this observation.

What a perfectly terrible business to be in. Granted, lots of executives and pilots and maintenance people and flight attendants have received paychecks and benefits over the last 80 years, but anybody looking to make a fortune by investing in this business had better look elsewhere.

[SeekAndFind]

This from the Wall Street Journal Just a few days ago :


Here's the Source

Two years after U.S. airlines were pounded by soaring fuel prices followed by the recession, the industry appears poised to post its first meaningful profit since 2007's third quarter. The major U.S. carriers will begin reporting second-quarter results next week, led by Delta Air Lines Inc. on Monday. Analysts expect all but one of the nine largest carriers—AMR Corp.'s American Airlines—to be in the black for the quarter and all of 2010, thanks to moderate fuel prices, an improving U.S. economy, fewer seats on offer and increased revenue from checked luggage and other optional services.

[Red6]

Nahhhh,

First class is like buying a Lexus, it's a pimped out Camry. The seat is a bit nicer, the stewardess has more time and they serve you better food on real dishes, but it's not the same as years past.

As kid I remember flying with Pan Am, TWA, AA......... It wasn't just because I was a big eyed kid and my perception was different, but flying back then really was something special and the stewardesses, the pilots, the passengers....... it was all a bit different. People would get dressed up before they travel, today you might sit next to a 300 pound smelly dude with stains on his snoop dog t-shirt, flip flops, goofy hat, jabbing his elbows into you and joking about his smelly feet. He'll beat you with his over sized baggage he's trying to stuff in an over head bin. Smoking, ha- I remember getting all you want to drink on some flights. It was standard for kids to get little pilot wings, the stewardess would make herself available, you could see the cockpit (Now called a “flight deck”), kids could often go in there......... To me flying has become boring and painful. It's like so many things- it's become sexless, tasteless, lifeless, classless. The difference between first class and coach is some tinsel, but air travel has lost all its glory and fancy. Look at the ugly uniforms, the ugly functional interior, the euphemistical language that has been dumbed down and lawyered through word for word......... Today I have to get screened by someone that looks Middle Eastern or named La Toya that usually looks like a pear, take off my shoes and walk through various testing equipment (not that it really accomplishes anything). The lady at the counter will have a heart attack when I bring in a gun unloaded and in a carrying case (although that's legal). Many things I might want to take I can't, for our safety of course (Not that it'll protect us). I can't even carry a drink I bought in the airport past the security check......... It's painful, it's boring, it's very modern American: classless, tasteless, lifeless, sexless.

Would you see this in the US nowadays? http://shanghaiscrap.com/wp-content/uploads/2008/02/beijing-air-stewardess-flight-stewardess-beijing-2008-china03.jpg learning how to bend down: http://www.beijingolympicsfan.com/wp-content/uploads/2007/10/beijing-air-stewardess-flight-stewardess-beijing-2008.jpg Of course just like we no longer have cockpits (We don't want to say the word ‘cock” do we?), we also no longer have stewardesses, they're now called flight attendant (sexless), and they usually wear pant suits.

Actually yes, I do fly myself whenever I can. But eventually my age and health will preclude that option. I really do believe if someone came up with an airline or a limited service between some major hubs where you have some class, some flair, they'd be successful. There are people out there that enjoy airplanes, that enjoy food, that want to travel in class, for whom a polite and professional stewardess matter. People who enjoy history and the mode of transportation is part of the trip itself, not just the fastest way from point A to the hip hop party at point B. Maybe a stewardess that uses the words “ma'am, and sir” and doesn't feel like this is personally derogating would be a good thing too. There are people for whom the flight is not merely the means, but at least in part an end in itself. They pay good money for trips on B24s, B17s, JU52s, B29s.....etc.

http://www.contrails.us/caf_dfw_wing/AirplaneRide.htm (Near where I live)

Something like this already exists: http://www.lufthansa-ju52.de/en/index.php And they're booked up! http://www.lufthansa-ju52.de/de/Ju-52-Rund-und-Streckenfluege/Ju-52-Flugplan.php (ausgebucht = full , Rundflug = round-trip) they're expanding, they're not even as expensive as a first class ticket, and best yet, they're making money!

It is sad that the birth place of modern commercial aviation, of powered flight, of the modern large jumbo has become what it has. I imagine in the US this might not even be possible, you'd have to sign some sort of waiver (safety), FAA won't allow smoking, you'd have to have placards everywhere (sort of like those stupid stickers on mowers telling you not to reach underneath while it's running) Some female with a nose ring and neck tattoo will file a law suit because she wasn't hired, or because she was asked to wear something that looks nice. But I can dream.

[Grizzled Bear]

The U.S. airline industry is rebounding. For the sixth consecutive month, carriers brought in more money than they did last year.

Uh-oh! There's a certain "Choo Choo Train" obsessed FReeper who we had better place on suicide watch!

[OldPossum]

I don’t recall ever being bullied by the TSA...

OK, maybe "bullied" is not the correct verb. What I wanted to convey was the resentment of TSA's telling you to empty your pockets, examining your camera, pawing through your suitcase, commanding you to take off your shoes, that sort of stuff.

The OP is not interested in being told to do such things. To me, flying is not worth that hassle. Screw 'em. I've seen enough of the world outside the USA that I care to.

[Red6]

Admit it,

If there were an airline where you didn't have to deal with that obscenity of a TSA, where you could fly on a plane like a Constellation, a JU-52, or a DC 6, where you could see the cockpit, had good food, the stewardess is polite and professional, where the inside of the plane is nicer, where it's understood that some people might like a cigar/cigarette and drink, some might carry a weapon (check in), where kids get catered too, the aircraft is polished metal (not a flying billboard with advertising on the vomit bags) you'd be interested? You'd maybe even brag about such a flight to your friends?

[LS]

Uh, I'm talking about just 15 years ago---well after deregulation. I remember taking widebodies to LA, getting meals, not paying for bags---it was almost like first class in coach. Columbus had direct to PHX or Las Vegas flights. So did Dayton, though I don't think they were common.

The point is, the current profits have come at greatly reduced air travel numbers. I'm don't know that that's particularly bad, but from about 1985 to about 2000, air travel was extremely democratic and available to almost everyone going anywhere.

[OldPossum]

Sure, I’d take a flight on such a plane. I can even remember such a flight back in 1966. I am positive it was on a DC-3 and the airline was Eastern Airlines.

Ahh, for the old days.

[LS]

I recall taking direct Columbus to Phoenix direct flights on America West in the early 1990s (AW went bankrupt not too long after that, but other carriers still did the route). They were big jets, pretty comfortable in coach, and we went for $333. I think smoking was outlawed then, and they still served in-flight meals. No, it wasn't "sexy" then. That was 20 years earlier. It was routine flying, which of course had its hassles, but you didn't pay for bags and you did get a meal and the planes still had leg room in coach.

And yes I take first class now because I can.

[Wuli]

Except for AMR Corp (American Airlines parent), which didn’t threaten either the actuality or the prospect of bankruptcy - as its competitors did - and instead continued under union wages and rules that the other airlines got better agreements on.

[Red6]

So when are we starting our airline? lol

Some ideas-

First we have to name it:
Nostalgia Air/airways/airlines
Classic Air/airways/airlines
Vintage Air/airways/airlines
Antique Air/airways/airlines

What uniform do you recommend we go with?: http://www.aviationexplorer.com/Vintage_Stewardess_Pictures.html (I would use something that even predates the 70s and late 60s where they became overly sexy and had some strange designs IMHO)

We need an emblem and this emblem/logo needs to tie into the wings (they have to work together): Which should we use as inspiration - http://www.stanwing.com/catalog_index.html

The best location to start something like this is between major metropolitan areas i.e. DC/New York (~210 miles). That trip on AA is ~$280 at their economy saver cost. We'd have to pick out a location that has decent public transit access and provide a shuttle service as many of our customers will be older. The planes not only fly their round robin circuit, but can also be chartered and fly occasional sight seeing tours. As we grow and have three different types of airframes, we combine these aircraft at the fixed base and offer tours and use them as a museum piece. what you do is combine your aircraft as part of a package at a smaller aerospace museum. Just as an example here in DFW: http://www.flightmuseum.com/about.htm This makes the aircraft have a value even when not in use and just sitting there.

Start with a smaller cheaper to purchase and operate i.e. http://en.wikipedia.org/wiki/Douglas_DC-3 airframe; prove market, fine tune business model, etc. Then grow and add airframes like the Constellation connecting a few major metro areas. Though the 247 was the first modern air liner, it's to small. If available and possible, pick aircraft that have a special meaning- belonged to VIPs, flew in special events.......... Attempt to use the special meaning of this aircraft in exploiting free media coverage but also in its restoration in securing funding from those who might have an attachment.

Limit the number of types of airframes. Two maybe three as we grow. Each exploiting their potential in capabilities. For example, start with one DC3, get another one. Then add a Constellation and go on longer trips say New York - Chicago, or even New York - Los Angeles via Dallas or Houston and Phoenix......

Operate near the major city but not near the major airport. Operate out of a smaller airfield and someplace where costs can be held down. Take over something like an older FBO and be near an aerospace museum. Locate near a more affluent area, yet where the population density is high (lot’s of potential customers).

Don't divide classes of passengers, that's a game airlines play where they upsell you very little at an enormous cost and this wouldn't be appealing to the customer we're catering to, it would make the layout of the interior more complex, add two types of seating, bite into economy of scale.......etc.

Maximize the potential you have for free advertising with such an operation ensuring you get some free news coverage. Exploit air shows (good target for advertising but also offer joy rides there which are highly profitable). Of course set up a web page as well and have the flight service advertised at the museum. Avoid expensive advertising in papers and magazines. We're too much in a niche market and geographically bound (news, airshows, museums, web).

Set up the interior of the aircraft to be plush, to have an expensive feel and look to it while also appearing retro. Avoid the technological gimmicks. Don't try too hard to stay true to the exact style, colors etc of the aircraft interiors, it's more about giving people an experience and costs shouldn't explode.

Don't worry about vegetarian, beef free, pork free etc diet concerns. Those type of folks aren't interested in this anyhow. Those types will take their feng shui rear somewhere else. Ensure the food is great, after all, these people want an “experience” not just a plane ride. Not only include some but sell alcoholic beverages, offer cigars while in flight (That sort of stuff also grabs the attention of folks even if they don't smoke) and the profit margin is huge. Serve the snack and drink on/in real porcelain (albeit nice but cheap) and of course sell it too. For example, here are some old menu's from airlines: http://findingaids.library.northwestern.edu/fedora/get/inu:inu-ead-trans-001/inu:EADbDef11/getListOfContents Click on American airlines and look at their menu. Now think about what you get on a flight? :)

Wow- I spent two hours on this..... lol Time goes quick when having fun. I don't watch TV, sorry.

[OldPossum]

I am impressed with your ideas. Such an airline certainly would attract those who are repelled by the current planes and service being offered, that’s for sure.

The problem is that the government (via the Department of Transportation) has wormed itself so much into the business of flying that they would be there telling you, “No, you can’t do this, you can’t do that.”

Business in America is so screwed. But, by their timidity, they’ve allowed this to happen.