WAPO: Airlines are making record profits, but don’t expect a cheaper seat

Discussion in 'General Discussion | Travel' started by NYCUA1K, Apr 30, 2015.  |  Print Topic

  1. NYCUA1K

    NYCUA1K Gold Member

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    American Airlines, which excels at not much of anything, just banked $1.2 billion in profit during its most profitable three months in history. The nation’s other major airlines are also swimming in record profits, largely thanks to fuel prices that plunged 40 percent within a year.

    But for Americans booking their summer travel, plane ticket prices are looking just as high as always. Domestic flights booked for between Memorial Day and Labor Day have averaged about $453.87, down a whopping $2.01 since last year, airline data show. (Buy 15 tickets, and you’ll have saved enough to buy this SkyMall cat fun tunnel.)

    U.S. airlines spend more on fuel than anything else, guzzling more than 40 million gallons a day, so you can imagine how much historically cheap oil contributes to their bottom line. American, Delta, Southwest and United saved about $3.3 billion on fuel in the first quarter, financial filings show.

    But their average fares have barely budged, highlighting once again just how much control airlines have over their paying customers, and how little they worry about competition. The average domestic flight last year cost $391, the highest since federal statisticians started tracking fares in 1995. Adjusted for inflation, fares are at a 12-year high.

    Continue reading...
     
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  2. legalalien
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    legalalien Gold Member

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    Biased and poorly written article, predictably generating gleeful anti-capitalist comments.
     
  3. NYCUA1K

    NYCUA1K Gold Member

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    Whether or not biased or poorly written, I cannot argue with the overall take of the piece since I have made the same basic point on this board
    The mega-mergers have dangerously decreased competition, tilting the playing field in favor of the airlines, which consequently can get away with pretty much anything since under the resulting air travel oligopoly customer retention, which would force competitive ticket pricing consistent with enhanced service, is no longer part of the economic model...
     
  4. legalalien
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    legalalien Gold Member

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    The article is poorly written because it quotes numbers out of context, compares 2014/1995 absolute prices not adjusted for inflation (newsflash: 2014 number is higher), and neglects to mention that inflation-adjusted prices are 13.8% lower today than they were back in 1995. Source? The same statistics he links to. Compared to pre-1978 era, inflation-adjusted prices are down over 30%.

    There were 9 major domestic carriers losing incredible amounts of money every day 10 years ago in the US. It was not a sustainable business model. AAL may have posted their best quarter ever in Q1 2015, but even today their profit margin is about 10% - decent, but certainly nothing spectacular. If you look back 10 years, however, their profit margins were mostly negative or around 0. How's that for some context around "record profits"? Same applies to all other major airlines. There is a reason all of them visited Chapter 11.

    Competitive situation in the US is no different from the rest of the world. Europe, a somewhat similar market, essentially has 3 airlines (LH/OS/LX, AF/KL, BA/IB) and a bunch of smaller competitors. Canada has 1.5. Australia has 1.5. Japan has 2. How many "major" airlines does US need?

    Even in 2008 - 2009, at the peak of oil prices, ticket prices were significantly lower than in 1995 (inflation adjusted, but not including auxiliary fees), and slightly lower that "10 years ago". 2014 prices are only slightly (~4.8%) higher than 2005 level; so much for "mega-mergers" being so bad for consumers' wallets. Starting an airline may be exorbitantly expensive, but in the last 15 years or so we have seen JetBlue, Virgin America, and Spirit come online. In fact, Spirit - not mega-merged legacies - is the most profitable airline in the US. So much for being part of oligopoly and being able to "get away with pretty much anything."
     
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  5. NYCUA1K

    NYCUA1K Gold Member

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    Like I said, it is tough to disagree with the overall take of the piece. We have an airline oligopoly (cartel), which now wants to go even further in consolidating its power over commercial aviation with bogus claims about how the 3 large middle-eastern carriers with very competitive products, have unfair advantage because they are being subsidized by their governments, completely ignoring the fact that our government is doing just that for them!

    You can give in to your knee-jerk tendency to defend oligopoles and plutocrats. I just know what I am experiencing and it is precisely what the WAPO piece is about. It won't be long before the DOT and DOJ intervene to stop a trend whose effects can already be felt...
     
    Last edited: May 1, 2015
  6. Wandering Aramean
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    Wandering Aramean Gold Member

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    Yes it will.
     
  7. NYCUA1K

    NYCUA1K Gold Member

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    Let's wait & see...
     
  8. Wandering Aramean
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    Wandering Aramean Gold Member

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    How long are we going to wait? What do you think "it won't be long" means in real time?
     
  9. NYCUA1K

    NYCUA1K Gold Member

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    If it happens at all regardless of when, then clearly there is a problem as postulated, which is all we are doing here...
     
  10. eponymous_coward
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    eponymous_coward Gold Member

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    I've heard that one before...

    “If you’re weak on the facts and strong on the law, pound the law. If you’re weak on the law and strong on the facts, pound the facts. If you’re weak on both, pound the table.”

    Sounds like a lot of table pounding to me (as the facts of inflation-adjusted airline fares being lower 20 years later, minus a bunch of airlines, and the law of mergers having been approved by the competent authorities is completely elided here). So, no, it's not tough to disagree with the take of the piece.

    The commercial airline industry isn't particularly bad compared to other industries in the US, if we're going to start brandishing rhetoric like that (for instance, I have many airlines to choose to fly from... not so many high-speed Internet service providers). There's many worse abuses to go after in the US than "waaaah, I can't cash in my cheap Y fares into premium cabins as easily now that airlines prioritize profit over market share and revenue over butt in seat miles". I also don't think government regulation of "we need 10 (or any number I suppose you would choose) national carriers" is likely to do much.
     
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  11. NYCUA1K

    NYCUA1K Gold Member

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    Whatever...
     
  12. eponymous_coward
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    eponymous_coward Gold Member

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    So, you say we're all clearly postulating a problem. Do you have a mouse in your pocket?
     

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