Thread: Airline woes
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Old October 20th, 2005, 09:49 AM
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Default Airline woes

About a week ago, somebody commented here that they didn't get fed on a recent flight from Hawaii, and that movie headsets cost them $2.

Today, in announcing a $153 million dollar loss for the third quarter for AMR (American and American Eagle), CEO Gerard Arpey made a few interesting observations.

1. The loss is in spite of significant year-over-year increases in every metric that is traditionally used to measure success: passengers carried, on time performance, load factor, the works.

2. The loss is due almost entirely to skyrocketing fuel prices. And he makes this point: in order to compensate for fuel price increases, ticket prices would have had to go up an average of $75 each over the last two years. But market forces have only allowed them to rise an average of $15.

Now, of course it's those market forces (in other words, newer, discount carriers) that were basically allowed to take hold because of terrible management at the old-line carriers during the "good" years. So in many ways, the inability to raise fares is their own fault.

But the fact remains that, as I've said before, air fares today are a ridiculous bargain by any reasonable standard. It's interesting that American and Continental are the only two "legacy" carriers that are still flying and that are not in bankruptcy. It's tough to compete against both the discount airlines and the airlines that have gained significant strategic advantages by going into bankruptcy. I actually admire those who work hard at competing without using the bankruptcy laws for leverage in blowing off their debts and abrogating their contracts.

So, I would respectfully suggest that the next time you're flying to your cruise and you don't get a meal, just be glad that the fares are not so high that they prevent you from taking that cruise.

And hope they stay that way, because the chances are that they'll eventually rise across the board pretty significantly.
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